Breach of Duty — Ontario Employment Law
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About Breach of Duty
When an employee deliberately acts against their employer's core interests, they may cross a critical legal line in Ontario common law known as a "breach of duty." All workers in Ontario owe their employer a basic duty of fidelity, loyalty, and good faith. Certain high-level personnel—such as executives, directors, or senior managers who possess significant power over a company's operations—owe a much stricter "fiduciary duty." A breach of duty occurs when these obligations are violated, either during active employment or, in some cases, shortly after resigning.
Breaches frequently arise in competitive situations. Common law dictates that while an employee is legally permitted to look for alternative work or quietly prepare to start their own venture, they cannot actively compete with their current employer while still on the payroll. Using company time, proprietary software, or confidential data to build a parallel business constitutes a clear breach. Post-employment breaches often involve former employees covertly downloading client lists or aggressively soliciting the customers they used to manage.
Under Ontario law, the consequences for breaching these duties can be severe. Employers do not merely terminate the worker for cause; they often initiate civil litigation to protect their enterprise. As seen in numerous Ontario court cases, an employer facing actionable harm may seek an interlocutory injunction—an urgent court order designed to immediately halt a former employee from soliciting clients or operating a rival firm while a lawsuit is pending. If an employer successfully proves a breach, the courts can award substantial damages. These remedies can include compensation for the business's lost profits, or even returning a portion of the salary the employee was paid during the period they were acting disloyally.
Navigating the boundary between fair marketplace competition and an unlawful breach requires careful analysis of an individual's role, their actions, and the timing of those actions. Because navigating these boundaries depends heavily on the specific context of the departure and the nature of the industry, getting tailored guidance from an employment lawyer is always the safest course before making a high-stakes career move.
Frequently Asked Questions
What is the difference between a breach of standard duty and a breach of fiduciary duty?
A standard breach of the duty of fidelity usually involves an employee failing to be honest or acting against the employer's interests while actively employed (e.g., working for a competitor on company time). A breach of fiduciary duty applies to senior, key personnel and extends further, heavily restricting their ability to solicit clients or exploit corporate opportunities even after they have left the company.
Can I be sued for planning a competing business while I am still employed?
Mere planning or preparation—such as incorporating a business or securing financing on your own time—is generally permissible under Ontario law. However, a breach of duty occurs if you solicit current clients, recruit fellow employees, or misuse company resources and confidential information while still on your employer’s payroll.
What happens if a former employer tries to get an injunction against me?
If an employer believes you are actively breaching your duties by poaching clients, they may seek an interlocutory injunction. If granted by the court, this interim order will legally restrain you from competing or contacting certain customers until a full trial determines the merits of the case.
How do courts calculate damages if an employee breaches their duty of loyalty?
Courts typically assess damages based on the actual financial loss the employer suffered, such as lost profits from clients unlawfully solicited by the former employee. In some egregious cases where an employee actively sabotaged their employer while still employed, the court may order the employee to repay a portion of their salary earned during the breach period.
Is there a deadline for an employer to sue for a breach of duty?
Yes. Under Ontario's Limitations Act, 2002, an employer generally has two years from the day they knew, or reasonably ought to have known, that the breach of duty occurred to file a lawsuit against the employee.
Should I speak to a legal professional if I receive a cease and desist letter accusing me of a breach?
Absolutely. A cease and desist letter is often the final warning before an employer files for a costly injunction or a lawsuit. Having an employment lawyer review the allegations immediately can help you determine if you actually crossed a legal line and how to de-escalate the dispute.
Common Scenarios
- A mid-level marketing manager downloads a highly sensitive, proprietary mailing list to a personal cloud account three days before resigning to accept a role at a direct competitor.
- A senior executive quietly uses their employer's resources, office space, and junior staff to develop a prototype for a new product, which they intend to patent and sell independently.
- An insurance broker legally resigns to open their own agency but immediately orchestrates a mass exodus by instructing the junior associates they used to supervise to follow them and bring their ongoing files.
- A software developer operates a freelance consulting gig entirely during their mandated 9-to-5 working hours, meaning their primary employer is paying their full wage while they service their own personal clients.
What You Should Know
- If you are planning to leave your job to launch a competing enterprise, ensure your preparation remains strictly personal—never use company devices, software licenses, or work hours to set up your new venture.
- Employers suspecting an active breach must act rapidly; if you delay filing for an interlocutory injunction, an Ontario court may deny the request on the grounds that the alleged harm is no longer urgent.
- Do not assume that because you lack a formal non-solicitation agreement you are free to poach clients; common law duties of good faith and fiduciary obligations can restrict your actions regardless of what is in your contract.
- If you are a high-level manager, remember that your legal obligations are higher than lower-level staff; before submitting your resignation to join a rival, have counsel review your transition plan to ensure it does not constitute a fiduciary breach.
Featured Cases
Levert Personnel Resources Inc. v. Leclair
2007 CanLII 56506 (ON SC) · 2007-12-20Fiduciary Duty Post-Employment: Injunction Suspended Due to Expiration of Obligation
An interlocutory injunction prohibiting a former employee from soliciting clients of their former employer was suspended. The court held that the fiduciary duty of the former employee was limited to a reasonable period post-employment and had expired, and that the plaintiff’s delay in advancing the action contributed to the suspension of the injunction.
Radd Precision Inc. v. Lall
1996 CanLII 8173 (ON SC) · 1996-01-09Employment Contract: Injunction Granted Against Former Employee for Breach of Fiduciary Duty
An interlocutory injunction was granted to prevent a former employee from competing with their former employer, based on allegations that the employee breached fiduciary duties by accessing customer information and registering a competing business while still employed. The court found that the plaintiff demonstrated a meritorious case and that the defendant's conduct posed a significant competitive threat.
White Oaks Welding Supplies v. Tapp
1983 CanLII 1674 (ON SC) · 1983-06-23Fiduciary Duty Breach: Sales Manager Solicits Customers After Resignation
A merits decision involving a senior employee who breached a fiduciary duty by soliciting customers of their former employer after resignation. The court considered whether the employee owed a fiduciary duty and whether damages for business losses should account for price support subsidies and competitive factors.
Alberts et al. v. Mountjoy et al.
1977 CanLII 1026 (ON SC) · 1977-08-02Fiduciary Duty Breach: Senior and Junior Employees Soliciting Clients Post-Resignation
A case involving a senior employee of an insurance agency who resigned and solicited clients of the former employer, raising the issue of whether senior employees owe a fiduciary duty not to solicit clients post-resignation. The court also addressed whether junior employees joining in the solicitation are subject to the same fiduciary duties and how damages for breach of such duties should be assessed.
Protective Plastics Ltd. v. Hawkins
1964 CanLII 198 (ON SC) · 1964-11-24Employee Breach of Duty: Employer Recovers One-Third Salary in Damages
A case involving an employee's breach of duty by using employer resources and confidential information while negotiating with a competitor. The employer sought damages for loss of customers and insufficient performance, with the court assessing damages at one-third of the employee's salary during the breach period.