Employee’s Failure to Disclose New Employment Cause for Termination? 

Last year, in CIBC Mellon Global Securities Services Company v. Baltman the Ontario Labour Relations Board considered the question of whether an employee’s conflict of interest in accepting a job offer from a competitor warranted his termination for cause.

Stuart Baltman was employed by CIBC Mellon for five years. At the time of his departure from the company, he held the position of Assistant Vice-President, Program Management and Improvement. In this capacity, he was privy to confidential information which would be valuable to competitors, specifically how CIBC Mellon structured its client relationships and approached potential clients.

Conflict of Interest

Baltman, like all other CIBC Mellon employees, was bound by the company’s corporate Code of Conduct, which provided that contravention of the Code may result in disciplinary action up to and including termination for cause. The Code stipulated, among other things, that:

• A conflict of interest is defined as a person or entity having two or more interests that are inconsistent.  Employees should take special care to ensure they identify and avoid any situation of actual or perceived conflict of interest.
• CIBC Mellon employees are not permitted to participate in any activity that creates a conflict or gives rise to a perceived conflict of interest. A perceived conflict of interest will occur when a reasonable person would believe a conflict could occur or has occurred.
• When employees are unclear whether a conflict exists, they are required to discuss the situation with their manager.

The Code also emphasizes that “all employees must act honestly and with integrity at all times.”

Baltman accepted an offer of employment with RBC Investor & Treasury Services, one of CIBC Mellon’s two main competitors, for a position similar to the one he held with CIBC Mellon. Unbeknownst to CIBC Mellon, Baltman had been in discussions with RBC regarding new employment for a number of months prior to accepting the offer. Moreover, once he had accepted RBC’s offer, Baltman did not tell anyone at CIBC Mellon, intending to wait until two weeks before his new job was scheduled to start.

CIBC Mellon discovered that Baltman had accepted a new position when RBC contacted its Vice-President of Human Resources, Muna Al-Joulani, requesting employment verification for Baltman as part of a background check.

Al-Joulani confronted Baltman and, after confirming that he had indeed accepted an offer of employment from a direct competitor, advised him that he could not remain with the company.

According to Al-Joulani, CIBC Mellon’s “standard protocol” is such that when an employee in a leadership role, such as Baltman, plans to go to a competitor, he must leave immediately and is paid a “notice period”. Baltman was offered this payment but declined, insisting that he was not resigning.

Al-Joulani also emphasized that it is not a conflict of interest to interview for another position. Accepting an offer of employment from a competitor is, however, a conflict of interest, and in these cases the employee must leave immediately. She also claimed that she knew of no situation where an employee did not immediately disclose acceptance of alternate employment.

While Baltman acknowledged that he was privy to information of a “sensitive nature”, he insisted that he would always maintain CIBC Mellon’s confidentiality. He did not believe that it was a breach of CIBC Mellon’s Code of Conduct to accept a job at RBC because he would never breach any trust.

The Decision

The Labour Board considered the situation through the lens of CIBC Mellon’s expectations from its senior employees who have access to confidential and sensitive business information, and confirmed that such a position would place a fiduciary obligation of good faith on the employee to the benefit of the employer. The Board found that Baltman was or ought to have been aware that his employer would expect him to disclose a new competing job and leave the workplace immediately, as had happened with other colleagues. The Board further found that Baltman was in breach of the Code of Conduct, which specifies that an employee is to disclose a conflict of interest and, if he is unsure if a conflict exists, that he should discuss the potential conflict with his manager. Accordingly, the Board concluded that Baltman acted dishonestly in his failure to disclose.

The Board confirmed that this was a case of willful misconduct which amounted to cause for termination.

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Please note that this article is for informational purposes only and does not constitute legal advice.

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