Employee Terminated for Cause for Not Disclosing Acceptance of Job with Competitor

The Ontario Labour Relations Board recently issued a decision finding an employee was in a conflict of interest when he accepted a job offer from a competitor that led to a termination for cause. 

What Happened?

The employee had been employed for 5 years and 3 days at the employer, a bank, and at the time of his departure held a vice-president position. The employee ran a number of project teams and did not directly interact with clients, with minimal exception. He did have access to confidential information and was involved in strategic planning, which could potentially be valuable to competitor banks or employers.

The employee planned to leave his employment and accepted a new job at a main competitor employer, another bank, in a position similar to the one he held with the employer. Unbeknownst to the employer, he had been in discussions with the competitor employer regarding new employment for a number of months prior to accepting the offer.

After the employee accepted the competitor employer’s job offer, he chose not to inform anyone immediately at his current employer and intended to wait until he gave his two weeks notice before starting his new job. 

However, a month and a half before beginning his new position, the employer received an email from the competitor employer requesting employment verification as part of a background check.   

The employer met with the employee to ask him if he had obtained alternate employment with a competitor. The employee was told he could not remain in his employment because he was going to a direct competitor. The employee retrieved his personal items from his office and was escorted out, as part of the employer’s “standard procedure”, where, if the employee is going to a competitor, the employee leaves immediately and is normally paid the notice period. The employee was offered the same arrangement but he declined and insisted he was not resigning. 

The employer stated that it was not a conflict of interest to interview for another position but accepting employment with a competitor is a conflict of interest and departure the same day is required. The employer stated that it had never encountered such a situation where the employee had not immediately disclosed acceptance of alternate employment.

The employee claimed that he did not think it was a conflict of interest to take a position with the competitor employer and that it was not a breach of the Code of Conduct (the “Code”) to accept a job at the competitor employer because he would never breach any trust. 

The employer alleged that the employee was terminated for wilful misconduct, disobedience or wilful neglect of duty that was not trivial or, in the alternative, he resigned his employment.

Code of Conduct

The employee, like all other employees, was bound by the corporate Code of Conduct (the “Code”) that provided “employees are expected to…follow this Code, including respecting both the letter and spirit of the Code.” 

The Code also stated that contravention of the Code may result in disciplinary action up to and including termination for cause. Parts of the Code stated that: 

•        “A conflict of interest is defined as a person or entity having two or more interests that are inconsistent. Employees should take special care to ensure they identify and avoid any situation of actual or perceived conflict of interest.

•        [E]mployees are not permitted to participate in any activity that creates a conflict or gives rise to a perceived conflict of interest. A perceived conflict of interest will occur when a reasonable person would believe a conflict could occur or has occurred.

•         When employees are unclear whether a conflict exists, they are required to discuss the situation with their manager.”

The Code also contained provisions with respect to “Outside Activities” which generally related to activities that were not obvious conflicts of interest. Before engaging in any such activity, the Code stated that “employees are expected to identify and avoid any outside interest or activity that will interfere with their duties at [the employer].” The Code also allowed employees to participate in outside business activities by taking another job, being self-employed or becoming an owner in some other business as long as they obtained prior approval by following a prescribed procedure in order to ensure that there was no conflict of interest.

Finally, the Code required that “all employees must act honestly and with integrity at all times.” 

The Decision

The Ontario Labour Relations Board (the “Board”) found that the employee was terminated by the employer for engaging in wilful misconduct; accordingly he was not entitled to either termination pay or severance pay under the Employment Standards Act. The Board stated:

“[The employee] accepted employment with [the competitor employer] and intentionally chose not to disclose his acceptance to [the employer] so that he could continue to work up to the last day prior to the start of his employment with [the competitor employer]. […]

Even without the evidence of the Code of Conduct and its content, the Board has no difficulty in finding that [the employee] intended to deceive [the employer] by withholding his acceptance of […] employment. He was at all material times in a fiduciary position as [a vice-president], a senior employee, a member of the leadership team and in possession of confidential and sensitive business information. He would have been well aware that [the employer] would expect him to disclose his new employment and leave immediately.”

The Board found that the Code was clear that potential or actual conflicts of interest were to be disclosed and that accepting employment with a major competitor was a conflict of interest, concluding:

“The Board finds that [the employee] put his own interests first and hoped to remain gainfully employed at [the employer] until he started at [the competitor employer], all without missing a pay cheque. It is somewhat ironic that his intentions were unwittingly defeated by his new employer sending what appeared to be a routine employment verification inquiry to [the employer].”

Therefore, the Board found that the employee was terminated for failure to disclose the conflict of interest in accepting the new employment and attempting to conceal it from his employer.  

As a result, the employee was not entitled to any payment by the employer. 

Get Advice

At Campbell Bader LLP, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.

At Campbell Bader LLP our knowledgeable employment lawyers can counsel you on your rights, advise you on your options, and help you create a plan for moving forward. We represent employees in Mississauga and areas west of Toronto. Contact us online or at 905-828-2247 to learn how we can help.