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BC Employment Standards Tribunal: Competition with Employer Amounts to Breach of Duty of Loyalty and Justifies Termination For Cause
October 6, 2004

The BC Employment Standards Tribunal has dismissed a claim for compensation for length of service made by an employee who was terminated for competing with his employer.

The employee worked as a computer salesperson. He had been warned previously against soliciting business for himself while working for the store. Nevertheless, he solicited work from a customer to update her computer software, and sold the customer software that was available at the store, for his personal gain. As a result, the company terminated his employment, citing just cause.

The employee filed a claim for compensation under section 63 of the Employment Standards Act. Section 63 provides for compensation based on length of service where an employee has been terminated without cause. The company argued that because the employee was terminated for cause, no compensation was owed. However, the Employment Standards Branch allowed the employee’s claim. The Branch accepted the employee’s contention that he did not understand that he was denying the employer a sale, and further, held that the company had a duty to warn the employee before terminating his employment.

The company appealed this decision to the Employment Standards Tribunal. The Tribunal reversed the Branch’s decision and dismissed the claim. The Tribunal held that an employee owes a duty of fidelity and good faith to his employer. By competing with his employer, the employee breached that duty, giving rise to the employer’s right to dismiss him for cause without warning. As a result, the employee was not entitled to compensation under section 63.

The Tribunal’s decision is consistent with the recognition by courts and labour arbitrators that an employee owes a duty of loyalty to his employer and that breach of that duty may amount to a serious employment offence justifying termination for cause.

OD International Inc., operating as Office Depot, BCEST #D154/04, August 31, 2004