Suppose that your best employee, the up-and-comer you’ve been training for several years, resigns. It’s terrible news for you, especially amid a labour shortage. And, to top it off, their new employer is your main competitor. How long has the employee been planning to leave? Did they plan during working hours? Using your company’s resources? What about the knowledge and contacts gained over the past few years: Will the employee share them with your competitor? If they did so, would it be illegal? At this point, one of your main concerns would be whether the resigning employee’s employment contract contains restrictive covenants, such as non-competition, non-solicitation or confidentiality undertakings. If it did, it would bode well for you provided that the covenants are valid and enforceable. You would otherwise have to rely on the duty of loyalty provided for in article 2088 of the Civil Code of Québec, a safety net that employers have relied on until a recent decision of the Court of Appeal of Québec limited its scope. Sahlaoui c. Médicus1 Mr. Sahlaoui, an orthotist-prosthetist, had been working for Médicus for about ten years, during which time he had built a relationship of trust with clients thanks to the quality of his services. He informed Médicus that he was resigning to start a competing company, Evo. Accusing Mr. Sahlaoui of breaching his duty of loyalty, Médicus sued him and his new company, claiming damages for one year’s lost profits, for hardship and inconvenience. The Superior Court awarded Médicus damages in the sum of $135,238, plus interest. However, the Court of Appeal dismissed Médicus’ recourse in its entirety and reaffirmed the right to freedom of work, concluding that the former employee, both before and after his resignation, had not breached his duty of loyalty. The Court thus considers that the duty of loyalty provided for in the Civil Code of Québec must be assessed in two stages, namely during and after employment. Duty during employment In the course of employment, an employee’s duty of loyalty is significant, especially for key employees and those with a great deal of professional discretion. The close ties that Mr. Sahlaoui had developed with clients during his employment were not enough to convince the Court that he had held a key position in his employer’s business, which, it should be noted, had approximately 350 employees at 15 branches. The Court is of the opinion that seeking new work does not in itself constitute a breach of the duty of loyalty, as it is an extension of the freedom of work. There are legitimate limits to the openness and transparency required under the terms of an employment contract, such that an employee may keep both their intention to change jobs and the steps taken to do so secret.2 On the other hand, the employee, while still employed, must not prepare their departure during working hours with tools provided by the employer. Stealing or hacking confidential information, withholding or misappropriating the employer’s business opportunities, taking client lists and recruiting clients for the employee’s benefit are examples of disloyal acts that the Court mentions. The judges cite with approval a 2007 decision of their court, which held that retaining or “refusing to turn over a former employer’s property in some cases constitutes outright theft, regardless of the notion of loyalty.”3 Duty after employment The Court of Appeal believes that the duty of loyalty is considerably reduced after an employee’s departure. The duty of loyalty set out in the Civil Code of Québec does not impose restrictions on an employee equivalent to those resulting from a well-drafted non-competition clause,4 particularly in terms of duration, because the duty of loyalty remains in effect for only a reasonable amount of time, which rarely exceeds a few months (three to four months).5 In this case, although Mr. Sahlaoui had signed a loyalty, confidentiality and non-competition undertaking to govern his post-employment conduct, the Court disregarded it because such undertaking did not meet the requirements for restrictive covenants established by the courts. Mr. Sahlaoui’s actions were therefore analyzed in terms of the duty of loyalty set out in article 2088 of the Civil Code of Québec. As the Court of Appeal points out, an employee who is not subject to a non-competition clause (or a non-solicitation or confidentiality clause having a term that exceeds the end of employment) may use their personal professional experience, i.e., their expertise, knowledge, network and skills acquired and developed with the former employer, as they see fit. Such employee may compete with their former employer, by soliciting its clientele, for example, without committing a fault.6 In short, the duty of loyalty under the Civil Code of Québec does not prohibit competition, but requires that it be exercised in moderation and only for a short time after employment ends. What it means Because the duty of loyalty is “rather minimal,” to quote the Court of Appeal, any organization would be well advised to protect itself by using restrictive clauses and having a clear plan of action for when an employee leaves to join the competition. To be enforceable, restrictive covenants must be specific and contextual. They must not exceed what is reasonable to protect the legitimate interests of the employer. The following questions are worth considering: When preparing an employment contract, is it possible to predict whether the employee in question will have direct relations with clients or suppliers? Will the employee learn, for example, the manufacturing processes or techniques that the organization strives to safeguard? If so, what restrictive clauses should be included in the employment contract, in particular regarding the nature of the employee’s tasks, reporting level and unique expertise? What needs to be protected? Examples include the confidentiality of information and the business’ reputation and services. The business should also protect itself against competition and solicitation of its clientele, suppliers and employees. To avoid unpleasant surprises, it is important to understand the purpose of each restrictive clause. They should also not be confused between them or thought to encompass the restrictions of another. Do the restrictive clauses meet the reasonable criteria necessary to be enforceable? Will they withstand contestation to the extent possible? Once the employee’s departure is announced, who will take over with clients or suppliers in order to maintain their trust? What security measures will be put in place when the departure is announced to ensure and preserve the confidentiality of certain information? The absence of restrictive covenants at the time of hiring is not disastrous, as the parties may negotiate such undertakings during the course of employment. While an employee cannot be forced to accept them, it is easier to reach an agreement when discussing a salary increase, promotion or other consideration, always making sure that the restrictive clauses are reasonable in light of the employee’s work context and the employer’s legitimate needs and rights. The parties may also agree to certain restrictions as part of an exit agreement. The Médicus decision has, at the very least, clarified the scope of the duty of loyalty provided for in the Civil Code of Québec. The members of our Labour and Employment Law group are available to advise you and answer your questions. Sahlaoui c. 2330-2029 Québec inc. (Médicus), 2021 QCCA 1310, see paragraph 59. See paragraph 35. Concentrés scientifiques Bélisle inc. c. Lyrco Nutrition inc. 2007 QCCA 676. See paragraph 44. See paragraph 48. See paragraph 53.

An employer grievance is a means that employers can use to obtain compensation for material damages caused by pressure tactics or to recover overpayments resulting from a union’s wrongdoing. Such a recourse can also be filed to claim damages and legal fees from a union that has abused the grievance arbitration process, in particular by raising grounds that are unfounded or filing applications that are dilatory, or doing either in bad faith. Although not very common, abuse of process does exist and can be sanctioned. However, an employer can successfully raise abuse of rights when a union’s actions are reckless, manifestly ill-founded, done in bad faith or dilatory. Two recent cases The decision in Régie intermunicipale de police Richelieu Saint-Laurent et Fraternité des policiers et policières Richelieu Saint-Laurent1 is an interesting example: The arbitrator ordered the union to reimburse the employer part of the legal costs that it had incurred, as well as the sums paid to three of its witnesses. The case can be summarized as follows. As a result of pressure tactics, three police were summoned to a disciplinary hearing before the discipline committee.  The parties agreed in writing to reschedule the hearings before the committee. The officers were finally met in 2014, after which they filed grievances to contest the disciplinary measures taken against them. Arbitration was set for May 2018 and a pre-trial conference was held prior to the hearing. At the hearing, the union raised a preliminary exception on the grounds that the disciplinary measures had been imposed outside the time limit set out in the collective agreement. The employer invited the union to make verifications, maintaining that the parties had agreed to postpone the hearing before the discipline committee. The union upheld its preliminary exception. The employer then filed a grievance, claiming damages arising from the union’s time-barred and unfounded preliminary exception. In January 2019, the parties presented their arguments on the preliminary exception and the employer grievance. On February 14, the union withdrew its preliminary exception during deliberations. The arbitrator allowed the employer grievance in part. He concluded that the exception filed by the union was unfounded and that the latter’s conduct was a clear example of an abuse of legal process. The employer was compensated for the costs incurred in defending itself against the abuse of rights. In Syndicat des professeures(eurs) de l'UQAM (SPUQ) et Université du Québec à Montréal (UQAM),2 the parties had recently renewed their collective agreement and agreed to a clause providing for a reduction in the salary of professors over 70. Shortly after the collective agreement came into force, grievances were filed challenging the discriminatory nature of the clause. UQAM filed an employer grievance alleging abuse of the grievance process by the union. The evidence showed that the union had agreed to the clause even though it knew that it was discriminatory, with the intention of challenging it in arbitration. The union had even asked that the age of the professors be added to the clause, which made its discriminatory nature even more obvious, thereby maximizing its chances of success at arbitration. The arbitrator allowed the employer grievance and ordered the union to reimburse the arbitrator’s fees and disbursements, as well as the professional fees charged by the employer’s lawyer to represent it during arbitration of the union grievance. He concluded that the union’s actions violated the duty to bargain in good faith and constituted an abuse of rights on the union’s part. Key takeaway and helpful tips Abuse of process can take many forms: the use of an unfounded declinatory exception, for example, or the filing of an abusive grievance arising from collective bargaining in bad faith. When confronted with situations not seen in the ordinary course of labour relations, an employer must determine whether there has been abuse of rights. Should abuse of rights be found, the employer could exceptionally claim the professional fees of its lawyers, the cost of summoning witnesses and possibly other damages resulting from the union’s wrongful conduct by filing an employer grievance. However, employers must bear in mind that an ill-founded union grievance, dismissed on the basis that the union’s interpretation of the facts or collective agreement differs from that of the employer, will not necessarily be deemed abusive. In order to win the case, the employer will have to prove that the union’s actions were reckless, manifestly ill-founded, in bad faith or dilatory. It goes without saying that an abuse of procedure by an employer could also be sanctioned by damages. The members of our Labour and Employment Law team are available to advise you and answer your questions. 2021 QCTA 319. 2021 QCTA 296.

In June 2018, amendments made to the Labour Standards Act ("LSA") included additional obligations and responsibilities for personnel placement agencies and temporary foreign worker recruitment agencies (the "Agencies"). However, these amendments were only supposed to come into effect on the date the government adopted a regulation setting out the standards and procedures for giving effect to the amendments to the Labour Standards Act. On April 10, 2019, the Quebec Minister of Labour, Employment and Social Solidarity published a Draft "Regulation respecting personnel placement agencies and recruitment agencies for temporary foreign workers" (the "Draft Regulation"). Although the introductory text to the Draft Regulation states that "the impact study shows that the proposed measures will have an insignificant impact on enterprises", on the contrary, our analysis of the Draft leads us to conclude that it will impose significant constraints on the Agencies. The beneficiaries of this reform appear, rather, to be the Agency workers and client enterprises. Agency Licence The Draft Regulation establishes a mandatory licensing scheme for Agencies: To obtain an operating licence issued by the Commission des normes, de l'équité, de la santé et de la sécurité du travail ("CNESST"), the Agencies and their officers must meet a series of criteria relating to integrity, transparency and solvency. These Agencies and their officers must be in good standing with various governmental departments and bodies, both in terms of compliance with the laws and the payment of fees or contributions. For example, an Agency may be disqualified if "in the 5 years preceding the application, the person, partnership or other entity has been condemned by an irrevocable decision of a court relating to discrimination, psychological harassment or reprisals, as part of employment" or because of criminal or penal convictions connected with the carrying on of the activities covered by the license application. All licences must be renewed every two years and, in the absence of new facts, a period of two years must elapse before a new licence application can be filed following a denial. Applications for a placement agency licence must be supported by the payment of security in the amount of $15,000 (to guarantee the protection of employees' rights under the LSA). Protection Of The Rights Of Agency Employees The Draft Regulation requires Agencies to take various measures to promote the exercise by employees of the rights protected by the Labour Standards Act ("LSA"). For example: The Agency must provide the employee it assigns to a client enterprise with a document describing his or her working conditions and identifying the enterprise in question. It must also provide the employee with the information documents made available by the CNESST concerning employees' rights and employers' obligations in respect of labour. The Agency must remind the client enterprise of its obligations regarding employee health and safety. The Agency may not charge fees to an employee for his or her assignment or training. Finally, restrictions on the hiring of Agency employees by a client enterprise may not exceed six months following the beginning of the assignment. Administrative Measures And Appeals The CNESST may suspend an Agency's licence at any time in the event of a breach of the requirements and, once the Draft Regulation has come into force, the Agency will be able to appeal the CNESST's decision to the Administrative Labour Tribunal (the “ALT”). Procedures For The Forthcoming Adoption Of The Draft Regulation Anyone wishing to make comments on the Draft Regulation is invited to submit them in writing to the Minister during the 45-day period beginning on April 10, 2019. We expect that various associations will be up in arms to get the Minister to relax what amounts to a very restrictive regulatory framework. At the end of this 45-day consultation period, the Minister may proceed with the formal publication of the Regulation, which will come into effect 15 days after publication. Agencies that are already operating on the date the Draft Regulation comes into effect may continue to operate, provided they apply to the CNESST for a licence within 45 days of that date. Note: All the provisions of the Labour Standards Act ("LSA") relating to Agencies will become law at the same time as the Regulation, including section 41.2 of the LSA, which prohibits a placement agency from remunerating an employee at a lower rate of wage than that granted to the employees of the client enterprise who perform the same tasks in the same establishment solely because of the employee's employment status. For the complete version (only available in French) of the draft regulation, click here.

A recent Superior Court decision in Peintures Industrielles Évotech1 ruled that the grievance arbitrator had acted within his jurisdiction in awarding moral damages to employees dismissed abruptly when the Company moved its operations to Ontario. Context of the Évotech case Évotech, which manufactures, distributes and sells industrial paint, was negotiating the renewal of a collective agreement that had expired several months before. When the lease of one of its two premises located in Québec was about to expire, Évotech moved its inventory and equipment to Cornwall in the neighbouring province of Ontario. The move made perfect sense for Évotech. Its Québec facilities had fallen into disrepair and had become unsafe. In addition, the relocation to Cornwall allowed the Company to benefit from significant subsidies. The plant director thus summoned all the employees to the cafeteria to announce the closure of the plant. Employees were told that they would receive a compensatory payment in lieu of notice equal to eight weeks of work in addition to the termination pay provided by the collective agreement. Several security guards were present when the director read a brief statement confirming the immediate dismissal and notifying the employees that they had to make an appointment to collect their belongings. According to the evidence, the employees were in shock. The union filed two grievances to contest the employer’s decision, alleging that the move resulted in giving work to persons excluded from the bargaining certificate, contrary to the provisions of the collective agreement. Seized with the grievances, arbitrator Charles Turmel concluded in his award that the move of operations and the collective dismissal contravened the clause of the collective agreement limiting the right to allocate work2. The arbitrator ordered the employer to pay to each dismissed employee $1,000 as moral damages, in addition to the equivalent of three weeks of salary per year of service. It is to be noted that these amounts were in addition to the 8 week indemnity for collective dismissal and the supplemental indemnity under the collective agreement. According to the arbitrator, awarding moral damages to the employees was justified by the [TRANSLATION] “suddenness of their dismissal”3. Furthermore, the arbitrator ordered Évotech to pay to the union $10,000 in damages for having failed to negotiate in good faith the renewal of the collective agreement, thus blaming the company for having undertaken the negotiations for the renewal of the collective agreement while planning the move of its operations. The decision in judicial review On April 10 on this year, the Superior Court allowed in part the application for judicial review and modified some of the conclusions of the arbitration award, which it deemed to be unreasonable. Madam Justice Chantal Tremblay confirmed that the arbitrator’s conclusion that the cessation of the employer’s operations in Québec constituted a relocation rather than a closure, fell within a range of reasonable outcomes. Moreover, the judge confirmed that the employer had failed to comply with the clause of the collective agreement prohibiting the Company from giving work to employees excluded from the bargaining unit. The Court considered that awarding $1,000 in moral damages to each of the employees also fell within a range of reasonable outcomes, in view of the circumstances surrounding the collective dismissal. However, the Court intervened to modify the conclusion of the arbitrator concerning the indemnity equal to three (3) weeks of salary per year of service on the ground that it failed to take into account the employees’ duty to mitigate their damages and the indemnities already paid by the employer. Lastly, the Court set aside the arbitrator’s conclusion ordering the employer to pay $10,000 in damages to the union on the ground that a complaint alleging bad faith negotiations must be brought before the Tribunal administratif du travail (the Québec equivalent to a Labour Board). Comments In the context of the judicial review, Justice Tremblay considered that awarding moral damages fell within a range of reasonable outcomes and that there was no reason for the Superior Court to intervene. However, one must consider that a refusal of the arbitrator to award such damages could have also fell within that range of reasonable outcomes. The Évotech case involves the discretionary power of the grievance arbitrator to award moral damages to employees to remedy harm which may not be compensated in nature4. Although such damages have recently been awarded in the context of abusive dismissal5, the implementation of unfair and unreasonable working conditions for some employees6 or within the context of a breach of a collective agreement, as the time provided for notifying the union of any subcontracts7, awarding moral damages as a result of a sudden collective dismissal is a first. On June 12, the Court of Appeal allowed the motion for leave to appeal of the employer on the basis of two issues, namely, the interpretation of a section of the collective agreement and the power of the Superior Court to modify the conclusions of an arbitration award instead of setting the award aside8. Until the Court of Appeal issues its decision, employers will have to keep in mind that they could be liable for damages in case of closures without prior notice. We are carefully monitoring this case and will keep you informed of any developments. Peintures Industrielles Évotech c. Turmel, 2017 QCCS 1375, statement of appeal and motion for leave to appeal, 2017-05-05 (C.A.), 500-09-026780-171. Peintures Industrielles Évotech inc. c. Syndicat des employés de Sico inc., section Évotech (CSN) (union grievance | Hgjf8576), 2015 QCTA 809. Id., para 152. Droit de l’arbitrage de grief, 6e édition, Éditions Yvon Blais, 2012, para IX-34. Kugler c. IBM Canada Limited, 2016 QCCS 6576. Centre intégré universitaire de santé et de services sociaux du Nord-de-l’Île-de-Montréal c. Jobin, 2017 QCCS 1583. Syndicat canadien de la fonction publique, section locale 2881 et Centre intégré universitaire de santé et de services sociaux de l’Ouest-de-l’Île-de-Montréal (Centre de santé et de services sociaux de Dorval-Lachine-LaSalle) (griefs syndicaux), 2016 QCTA 893. Peintures industrielles Évotech c. Syndicat des employés de Sico inc. (CSN), section Évotech, 2017 QCCA 932.