If a large number of clients follow a former employee to their new employer, does this amount to solicitation? What if that former employee sent letters to the clients of their former employer, informing them of their departure on the letterhead of their new employer? The Ontario Superior Court, in the decision of OIBC v. KO, 2018 ONSC 4612, found that these actions by an insurance broker did not constitute solicitation.
The Facts
The Plaintiff in this case is an insurance brokerage, Overseas Insurance Brokers Corporation (“OIBC”), and the Defendant, Ms. Ko, is a former employee of OIBC. Ms. Ko worked at OIBC for 23 years, but in May 2015 resigned stating she wanted more time for herself. Ms. Ko subsequently changed her mind, and accepted a job with the Co- Defendant insurance brokerage, Broker Team Insurance Solutions Inc. (“Broker Team”).
A substantial amount of OIBC’s clients moved their business over to Ms. Ko at Broker Team. OIBC then sued Ms. Ko and Broker Team for a number of claims including breach of contract, interference with contractual relations, breach of fidelity and fiduciary duty.
Important to note in this case is that it was disputed whether an employment contract was ever actually signed. Ms. Ko produced an employment contract that contained no restrictive covenants, while OIBC contended there was never a contract. The Court finds that either way, there were no restrictive covenants contracted for.
The Court’s Analysis
1) Fiduciary relationship not present
On the accusation of breach of fiduciary duty, the Court holds that Ms. Ko was not a fiduciary of OIBC. Though her official title was “Assistant Manager” this was held to be in name only and she had no significant management duties. Despite her long tenure, she was essentially an ordinary insurance salesperson and as such owed no fiduciary duty to OIBC.
2) No confidential information was taken
The Court then looks at whether Ms. Ko took confidential information from OIBC. Though the law prohibits former employees from taking client lists from their employers, it does not prohibit them from soliciting customers from memory.
What about if the contact information of the clients is stored on the employee’s personal cell phone?
The Court finds that the ownership of the phone, as in where the information is stored, is not dispositive. The Court writes at paragraph 28:
The fundamental issue is whether this information has a quality of confidence about it and whether it was communicated in circumstances where the obligation of confidence arises… In assessing this, the nature of the information is important. In the case at bar, the information in question reveals little beyond the bare name of a client and a contact number/address.
As Ms. Ko had a valid reason for possessing this information in the first place, namely keeping in contact with clients and tracking commissions, and obtained it through the performance of her job, the Court finds that her having this information was reasonable and did not amount to taking confidential information.
3) Reaching out to clients not sufficient to show solicitation
Following her resignation, Ms. Ko sent letters to 242 of her clients from the contact list in her phone, on the Broker Team letterhead. A sample of one of these letters was provided in Ms. Ko’s affidavit, cited from paragraph 34 of the decision:
Dear client,
I am writing to keep you up-to-date of my recent move to a reputable insurance brokerage, Broker Team Insurance solutions Inc., effective immediately. As my clients, your interests are well protected and my responsibilities to you are not reduced.
Your current policies are not affected at all and they will continuously be looked after by my previous employer, OIBC.
If you have any questions or concerns, my cell phone remains unchanged and is 416-721-8688.
Thank you for your continuous support and patronage.
Yours sincerely,
Ms. Ko
Ms. Ko stated that she did not phone these clients, but they contacted her to facilitate transferring their business from OIBC to Broker Team. All the proper documentation was signed, and no confidential information was used in these transactions.
The Court held that these actions, including the letters, did not amount to solicitation but were “informative, assuring and professional” (para 36). The Court also makes clear that the sheer number of clients who transferred to Ms. Ko does not in itself indicate solicitation. All factors must be looked at in order to determine whether solicitation has taken place.
Takeaways for Employees
Ms. Ko in this case, through subtleties and by staying above-board in her communications, was able to communicate her change of employment without actually soliciting. Despite depriving OIBC of a significant amount of business, the Court found all Ms. Ko’s actions to be reasonable and legitimate.
If you are concerned about your non-solicitation obligations, Monkhouse Law can help you understand your duties and ensure that you meet the legal requirements. Contact us for a free 30 minute phone consultation at 416-907-9249 or fill out this quick form.