The Importance of Knowing Whether A Fiduciary Relationship Exists
For employees, a fiduciary relationship exists where the employee is in a position to cause the employer damage due to the duties of employment. This is not limited to senior managers or executive – a key employee may also be in a fiduciary relation. Such a relationship may exist where the employer is placed in a vulnerable position in order to receive services from the employee. An example may be where an employee is exposed to trade secrets in order to fulfill services owed to the employer. There are a number of of fiduciary duties such employees will have in order to protect the employer from the inherent vulnerabilities of the employment relation.
When assessing whether a fiduciary relationship exists, the courts have set the following criteria. To be in a fiduciary relation, (1) the employee must have scope for the exercise of some discretion or power, (2) the employee must be able to unilaterally exercise that power or discretion so as to affect the employer’s legal or practical interests, and (3) the employer must be peculiarly vulnerable to the employee holding the discretion.
Employees in a fiduciary relation have a duty of “loyalty, good faith and avoidance of conflict of duty and self-interest” (Supreme Court of Canada – 1973). This means that employees with fiduciary duties cannot solicit any customers/clients from their previous employers, enter anything that causes their personal interests to conflict with their employer’s interests during their employment, or deprive their former employer of business opportunities which belong to the employer. Each duty will be limited in duration in accordance to the facts of each particular case, which makes it important to seek advice from an employment law expert if in a fiduciary relation with an employer.