RBC Dominion Securities v. Merrill Lynch: Placing an Additional


On October 9, 2008 the Supreme Court of Canada issued its judgement on an important for the financial and securities industry. In RBC Dominion Securities Inc. V. Merrill Lynch, et al . the court was forced to answer difficult questions about the nature of the employee-employer relationship. In particular the court reviewed the duties that a non-fiduciary employee in a management role owes to its current, and previous, employer. A near unanimous court, in a judgement written by Chief Justice McLaughlin, ruled that even non-fiduciary employees owe certain implied duties to their employers and should these duties not be met they can be liable for a substantial amount of damages. These duties include the duty to retain employees in good faith. Justice Abella issued a partially dissenting judgement in which she rejected the reasoning of the majority on the issue of the duties that exist for a non-fiduciary employee, particular the duties imposed on a manager in a non-fiduciary role with the company. She further argued that the majorities measure of damages is unjustified by the principles of damages for breach of contract and how they should apply to the case at bar.

With great respect to the majority of the court, this paper argues that the judgement given by Justice Abella is more logical in light of the competitive nature of the financial and securities industry, the historical treatment of good faith in employment contracts and the Canadian legal precedent regarding the absence of restrictive covenants. The majority judgement in this case, by ignoring the important policy considerations addressed by Justice Abella, has the capacity to substantially alter the freedom of employees within this industry and shifts the balance of power in this relationship even more into the hands of the employer.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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