March 17, 2026
What happens when a senior employee departs and sets up a competing business?
THE ISSUE
With Ontario’s Employment Standards Act banning non-competition agreements (except for listed “Chief” officers), this is an increasingly important question.
Employers may not be pleased by the result in Titus Steel Company Limited v. Hack. But they need to be aware.
The Ontario Court of Appeal upheld the trial judge’s decision in favour of the ex-employee, despite the fact that the judge decided that the employee had committed the tort of conversion, the private law equivalent of theft.
Hack, a long-time employee who had risen to the role of Vice-President of Titus, left and set up a competitor. No doubt Titus was surprised when the judge found that Hack was not a fiduciary and therefore was entitled to use information that he knew from his employment to compete.
In order to be a fiduciary, an employee must have enough control over the business that it will be vulnerable after their departure. The trial judge relied upon the fact that salesmen are seldom found to be fiduciaries. In spite of Hack’s title, he was a salesman. The Court of Appeal did not interfere with this finding of fact.
But even if an employee is not a fiduciary, they owe duties of good faith, loyalty and fidelity.
Hack took over one thousand documents with him when he quit.
How is this not a breach of those duties?
The short answer is that it is- taking someone else’s property for your own use is conversion.
Hack was guilty of conversion.
The further bad news for Titus though was that the judge found that it suffered no damages as a result of the breach. The judge found that Titus failed to prove that the documents had any value.
We have written before about the need to prove your damages in lawsuits in general. This is another stunning example. There was no evidence that Titus lost customers or business as a result of the misconduct.
Since it was also a finding of fact by a trial judge, the Court of Appeal did not interfere with that aspect of the decision. They concluded that: “The appellant seeks through this appeal to relitigate the findings of the trial judge. Those findings are entitled to deference.”
The judge did not give any explanation why he did not award nominal damages to denounce Hack’s misconduct. That issue was not part of the appeal.
Instead of recovering damages, Titus was ordered to pay Hack in excess of $180,000.00 in court costs. A costly lesson.
TAKEAWAYS
- Not all employees are fiduciaries, no matter what their title.
- Employees who are not fiduciaries owe only limited duties of good faith, loyalty and fidelity to their former employers. These duties do not prevent competition.
- Even a breach of these duties will not lead to damages unless the former employer proves that they suffered a loss.
- Despite being in breach of the law, the ex-employee may be awarded costs if no damages are proved.
WHAT WEILERS LLP CAN DO TO HELP YOU
Whether you are an employer or a former employee, the growing complexity of the rules surrounding conduct after departure; the boundaries of misconduct; and the consequences may require that you obtain timely advice.
If you have a dispute following the departure of an employee, our employment and litigation teams have the experience and skills to provide the advice that you need. If a lawsuit is necessary, we will bring the litigation to a conclusion in the least painful and least expensive fashion possible. This includes being aware of the need to prove (or oppose) damages. In fact, our counsel, Brian Babcock, teaches about how to prove damages in his course on Remedies at the Bora Laskin Faculty of Law
For more information, or to discuss your particular needs, give us a call. Weilers LLP might be the right lawyers for you.