Breach of Post-Employment Obligations: A Costly Lesson for Employers

Written by Jenna B. Smith, Associate in Fredericton

As explained recently by the Ontario Court of Appeal decision Titus Steel Company Limited v. Hack, 2025 ONCA 693 (CanLII), even when a former employee breaches their post-employment obligations, the breach may not give rise to damages. Even worse, the Employer can be ordered to pay costs notwithstanding the fact that they proved the former employee breached their post-employment obligations.

Case Summary

Titus Steel Company Limited (the “Employer”), is a family-run business specializing in ballistic steel products. The Employee worked for the Employer for 15 years, first as a Director of Sales and then as the Vice President.

Shortly before he resigned from his employment and began a competing company which also sold ballistic steel products, the Employee copied and downloaded over 1,000 business records. The competing company operated for one year before it closed.

The Employer discovered that the Employee had downloaded its business records and used them in his new competing company. The Employer sued the Employee, alleging a breach of fiduciary obligations, or in the alternative, a breach of employment duties.

The trial judge found that the Employee had not breached any fiduciary duty as he was not a fiduciary employee. The court explained that the title of “Vice President” did not automatically establish a fiduciary relationship and that salespeople are rarely found to be fiduciaries.

The trial judge did find that the Employee breached his employment duties of good faith, loyalty and fidelity by misappropriating the Employer’s business records upon his resignation which constituted the tort of conversion.

However, the court found that the Employer had failed to show that the use of the confidential business records by the Employee had caused the Employer to suffer any damages, such as a loss of customers or profit. Also, only two of the 1,000 business records downloaded by the Employee contained confidential information.

The Court of Appeal upheld the award of the trial judge, which ordered the Employee to return all of the Employer’s business records within seven days and awarded $161,264.00 in costs to the Employee. On appeal, the Employee was entitled to an additional $20,000.00 in costs for a total of $181,264.00.

Key Takeaways

Proving that a former employee has taken confidential information and breached their obligations to the employer isn’t enough to be successful in a legal action – the employer must also be able to prove that it has suffered damages.

Employers should remind departing employees of their post-employment obligations. This case reinforces that all departing employees owe an obligation to their former employer not to maintain and misuse confidential information which belongs to the employer. Additionally, the common law implies a duty of good faith, loyalty and fidelity on all employees.

A fiduciary employee with a greater level of trust owes the employer more extensive post-employment obligations, such as restricting the solicitation of customers and employees. As shown in this case, it is the duties and responsibilities of the employee which determine whether they are a fiduciary employee, not their job title.

The case highlights that if an employee breaches their post-employment obligations of good faith, loyalty and fidelity, the employer must show that the breach caused the employer to suffer a loss in order to recover damages.