Legal News

BC Supreme Court Awards Employer Damages for Losses Suffered When Departing Employees Join Competitor

The British Columbia Supreme Court recently awarded a brokerage firm damages for losses suffered when a large number of its employees left to join a competitor. Included in the award was over $270,000 in punitive damages.

In November, 2000, the senior manager and almost the entire sales force of RBC Dominion Securities’ (“RBC”) Cranbrook and Nelson offices left to join a competitor, Merrill Lynch. RBC sued the departing employees, Merrill Lynch and a Merrill Lynch manager for damages arising from the mass departure.

In an earlier judgment (2003 BCSC 1773), the BC Supreme Court concluded that the employees’ departure constituted a breach of an implied term in their employment contracts to provide reasonable notice of the termination of their employment.

In addition, the Court found the departing employees had breached their duty not to compete unfairly with RBC by:

  • engaging in vigorous efforts to move clients to Merrill Lynch before RBC was in a position to try to protect its relationship with those clients, and

  • removing all of RBC’s confidential client records several weeks before the move to facilitate the transfer of clients to Merrill Lynch

On November 12, 2004, the Supreme Court released its decision assessing the damages payable to RBC by Merrill Lynch and the defendant employees. The concerted efforts by the employees to hide their planned departure from RBC, coupled with their actions in taking confidential RBC information to their new employer, resulted in significant damages against the employees personally and Merrill Lynch, including:

  • damages against the investment advisors for RBC’s loss of profit at the branches for a 2.5 week period (being the amount of notice the employees should have given RBC of their intention to join Merrill Lynch);

  • nominal damages of $1,000 against five administrative assistants for failing to provide RBC with reasonable notice of their intention to leave RBC and join Merrill Lynch;

  • damages against the manager and investment advisors personally for a percentage of RBC’s loss of profits (estimated at over $3,000,000) from November, 2000 to October, 2005; and

  • $10,000 in punitive damages against the two senior managers and $5,000 in punitive damages against each investment advisor.

Merrill Lynch, the new employer, was ordered to pay $250,000 in punitive damages.

RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc. et al, 2004 BCSC 1464, November 10, 2004