From Toronto BLANEY McMURTRY LLP
January 2013 |
When Can an Employer Sue an Employee for Damages?
Property Damage
Emily Anne Maclean worked in a farmer’s market. On August 1, 2003, she placed eggs on a hot plate to boil in order to make them ready for the next day’s sandwiches. She got distracted in another part of the store. Upon smelling smoke, she returned to the hot plate only to find “full blown flames”. The farmer's market was destroyed and Ms. MacLean was sued in negligence by the market’s insurer. In dismissing this claim, the Court concluded:
Emily Anne Maclean worked in a farmer’s market. On August 1, 2003, she placed eggs on a hot plate to boil in order to make them ready for the next day’s sandwiches. She got distracted in another part of the store. Upon smelling smoke, she returned to the hot plate only to find “full blown flames”. The farmer's market was destroyed and Ms. MacLean was sued in negligence by the market’s insurer. In dismissing this claim, the Court concluded:
- employees are not generally held
liable for ordinary negligence or carelessness in the performance of
their duties;
- the imposition of liability in such
a case would be unjust and/or unfair;
- an employer accepts the risk of employee fallibility and takes that into account in the costs of doing business, supervising the employee and insuring the enterprise.
Accordingly,
although it is clearly reasonable for an employer to expect its
employees to exercise reasonable care in the performance of their
duties, it will only be where the degree of fault by the employee goes
beyond mere negligence, that a claim for damages will have any chance
of success.
The
inability to recover damages in negligence does not preclude the
employer from alleging cause for dismissal in an appropriate case.
A Suit to Recover Damages Payable to a
Third Party
It is settled law that employers are vicariously responsible for the harm caused by an employee in the performance of the employee’s duties. The question then becomes whether the employer can recover the damages it paid to the third party from the negligent employee. As one might expect from the analysis above, the likely answer is that recovery will be restricted to those situations where the employee’s conduct was grossly negligent. Again, inability to recover does not prevent discipline and, where justified, dismissal for cause.
It is settled law that employers are vicariously responsible for the harm caused by an employee in the performance of the employee’s duties. The question then becomes whether the employer can recover the damages it paid to the third party from the negligent employee. As one might expect from the analysis above, the likely answer is that recovery will be restricted to those situations where the employee’s conduct was grossly negligent. Again, inability to recover does not prevent discipline and, where justified, dismissal for cause.
Suing for Breach of Contract
It is quite common for employers to require senior employees to execute covenants which prevent or restrict certain activities. Examples include maintenance of confidentiality and prohibiting the soliciting of clients or co-workers for a reasonable period of time following resignation or termination. Provided these clauses are carefully drafted to meet current judicially mandated standards and are incorporated into a properly executed employment agreement, they can form the basis of a successful lawsuit against an employee who ignores contractual terms to which the employee agreed.
It is quite common for employers to require senior employees to execute covenants which prevent or restrict certain activities. Examples include maintenance of confidentiality and prohibiting the soliciting of clients or co-workers for a reasonable period of time following resignation or termination. Provided these clauses are carefully drafted to meet current judicially mandated standards and are incorporated into a properly executed employment agreement, they can form the basis of a successful lawsuit against an employee who ignores contractual terms to which the employee agreed.
In this type of lawsuit, the employer must act quickly after learning
of the breach, seeking a mandatory order prohibiting the continuation
of the offensive action. While an order actually prohibiting
continuance of the breach (an injunction) may not be granted, the
employee will be required to pay the damages suffered by the employer
resulting from the competitive activity. Furthermore, the very act of
commencing the lawsuit may cause the offending employee to cease the
prohibited activity.
Breach of Duty of FidelityEven without a valid restrictive covenant, senior employees are required to act in good faith towards their employer and not exploit the vulnerability which flows from the nature of the relationship. For example, although such an employee is entitled to compete following employment, in doing so, he/she must not do so unfairly. This means that for a reasonable period of time following resignation, he/she is not to utilize confidential information or affiliations developed during employment in a manner detrimental to the former employer. Doing so is considered unfair and a breach of this obligation of fidelity. Provided the status with the employer was senior enough, a court will enforce these obligations by way of requiring the departed employee to disgorge the profits earned from the improper activity.
