It is important to distinguish the duty of loyalty and the non-competition clause which are two very different concepts in labour law.
a) Definition and scope of the duty of loyalty
The duty of loyalty has been codified in the Civil Code of Québec in Art. 2088. This duty is much broader and less restrictive than the non-competition clause. In fact, the duty of loyalty is nothing more than an expression of good faith in employment contracts and in the exercise of civil rights.
Moreover, the duty of loyalty exists in all employer / employee relationships and survives the termination of the employment contract. Unlike the non-competition clause which must be written to be valid, the duty of loyalty does not need to be included in the contract to be effective.
Case law has interpreted this principle in a rather liberal manner, consequently allowing a former employee to compete with his former employer while prohibiting unfair and abusive competition.
When a current employee acts within the scope of his employment, the duty of loyalty is translated in different ways. Therefore, the employee must:
- Refrain from placing himself in a conflict of interest with his employer;
- Protect confidential information;
- Demonstrate good judgment and integrity in their role within the
- Stay honest with the employer.
b) Duration of the duty of loyalty
The duration of the duty of loyalty varies across different types employments according to different non-exhaustive criteria, such as:
- Degree of responsibilities bestowed upon the employee;
- Access to confidential and strategic information;
- Area of business;
- Reasons behind the termination of the employment contract; and
Level of competition within the area of business.
A 2012 Quebec Court of Appeal decision held that the duty of loyalty rarely survives a few months after the end of the employee / employer relationship. In fact, the court recognized the importance of competition in a capitalist society, provided that such competition is fair and normal.
DID YOU KNOW THAT…
The obligation of loyalty which arises during the contract of employment continues to have effects even after termination of said contract and can justify, if necessary, the issue of an injunction to put an end to acts of illegal competition.
The case of dual employment – does this violate the duty of loyalty? It depends, it is a question which depends on the facts of the situation. However, dual employment could potentially generate a conflict of interest.
Discussions with a future or prospective employer do not in themselves constitute a breach of the duty of loyalty. An employee has the right to contact other employers, but such contact is subject to compliance with the non-compete clause and the protection of confidential information.
The obligation of loyalty does not require that a former employee refuse to take on clients which decided to follow him/her. Clients are free to make their choice, therefore an injunction cannot be ordered to prohibit a former employee from rendering services to clients of his former employer who have retained his services, without solicitation on his behalf.
In addition, the former employee must not use or disclose confidential information acquired during the course of employment for a reasonable period of time after the termination of the contract of employment.
Question: Marc-André left his executive job at a Montreal engineering firm a few weeks ago. He has just received a job offer from a competing company. Marc-André thinks he is very qualified for the position because he will be able to use some privileged information obtained through his former employment to advance the competing company’s interests.
Is Marc-André acting legally in pursuing this course of action?
Answer: NO! It is important for him to mention that he is prohibited from using privileged information obtained through his former occupation to the benefit of the competing company. The duty of loyalty prohibits him from disclosing privileged information. Marc-André will have to find another way to be valued within the competing company in order to be hired.
In summary, the duty of loyalty applies to all current employees at all time, and former employees for a certain period of time. The non-competition clause however must be expressly written in the employment contract to for it to be valid and effective.
The duty of loyalty must be interpreted more restrictively than the non-competition clause due to its wide scope of application.
Ultimately, this duty aims to protect employers from former employees who, with ill-intent and dishonesty, could benefit from privileged information obtained during the course of their employment in order to further competing interests.
If you are looking for a law firm with reasonable rates, quick and efficient turnaround time for your files and who provides personalized and effective follow-ups, call Schneider Attorneys at (514) 439-1322 ext. 112 or email us at firstname.lastname@example.org
The above noted text should not be construed as providing legal advice or a statement of your claim. The process highlighted above are merely parameters and barometers and do not constitute any warranties and guaranties with regards to your file at hand. We strongly recommend that you seek legal advice with a licensed attorney from the Barreau du Quebec or a notary at the Chambre des Notaires. Each case must be seen and analysed on its merits as the legal process may be complex and cumbersome.