The Common Law Obligations of the Employee under the Contract of Employment

• Author: Geoffrey England
• Pages: 49-83

49

CHAPTER 4

THE COMMON LAW

OBLIGATIONS OF THE

EMPLOYEE UNDER

THE CONTRACT OF

EMPLOYMENT

An employee owes his or her employer obligations under both the ex-

press and the implied terms of the employment contract.1 Regarding

the employee’s express obligations, in Chapter 3 we saw that employ-

ment contracts generally do not contain a detailed and comprehensive

list of the employee’s duties, except perhaps for higher echelon execu-

tives, sports stars, and entertainers. Usually, the contract of employ-

ment will state little about the employee’s obligations beyond providing

a brief job description and summarizing the basic pay, the basic hours

of work, and annual vacations. The most common exception is a re-

strictive covenant that prevents the employee from competing with

his or her employer within a def‌ined area and for a def‌ined time after

the employment relationship ends. We examine the law on restrictive

covenants in this chapter. The explanation for the relative dearth of ex-

press terms in employment contracts is that the parties cannot, when

they are negotiating their contract, foresee all possible contingencies

that might occur over the lifetime of their relationship and deal with

them in advance. Consequently, the courts have had to f‌ill the gap by

implying terms into the employment contract, and the scope of the

employee’s obligations to the employer at common law depends almost

exclusively on these implied terms.

1 For further det ailed elaboration on this topic , see G. England, R. Wood, & I.

Christie, Employ ment Law in Canada, 4th ed ., looseleaf (Markham, ON: Lex is-

Nexis Can ada, 2005–) c. 11 (II–III).

INDIVIDUAL EMPLOYMEN T LAW50

According to the general principles of contract law, terms must be

implied into a contract in order to give effect to the unstated factual

intentions of the parties; otherwise “freedom of contract” would be

jeopardized. In reality, courts often imply terms into contracts in order

to ref‌lect the judges’ perceptions of what the parties’ respective rights

and obligations ought to be as a matter of public policy. This has clear-

ly happened in the case of the employee’s implied obligations under

the employment contract. The courts have, over the years, developed

a standardized body of particular obligations that are implied into all

employment contracts. The cornerstone of these particular obligations,

however, is an overriding residual duty of the employee to conduct

himself or herself in the best interests of the employer, usually referred

to as the “duty of f‌idelity.”2 This duty is critically important for employ-

ers. Because the employer cannot predict and set specif‌ic rules in ad-

vance for the myriad circumstances that can arise during the course of

a long-term employment relationship, it is essential that the employer

have the f‌lexibility to command obedience from its employees as new

circumstances arise.3 Plainly, it would be grossly ineff‌icient if the em-

ployer had to renegotiate the express terms of the employment con-

tract every time an unexpected occurrence arose! The implied duty of

f‌idelity, therefore, delineates the scope of “managerial prerogative” at

common law.

Most of the cases on the implied obligations of the employee arise

in the context of litigation over wrongful dismissal, since the employ-

er’s usual reaction to a perceived breach of duty is to f‌ire the worker

summarily without notice or wages in lieu. Consequently, the scope

of the employee’s implied obligations becomes inextricably interwoven

with the issue of whether the employer had “just cause” for summary

dismissal. We shall see in our examination of just cause how the rigour

of the employee’s implied duty of f‌idelity has been tempered to ref‌lect

modern notions of proportionality, equality, and fairness.4 The Charter

has indirectly inf‌luenced the development of the common law greatly

2 The historica l antecedents of the employee’s duty of f‌idelit y can be traced to

the pre-Industr ial Revolution law of master and s ervant in England. See, for

example, A. Fox, Beyond Con tract: Work, Power and Trust Relation s (London:

Faber, 1974) at 154–59, 178–81, 184–88; D. Hay, “England, 1562–1875: The

Law and Its Use s” in D. Hay & P. Craven, eds., Masters, Se rvants and Magistrates

in Britain and the Empire, 1562–1955 (Chapel Hill, NC: Universit y of North Caro-

lina Pre ss, 2004) at 59.

3 The centralit y of this point cannot be overemph asized. See, for example, J. Go -

dard, “The Progre ssive HRM Paradigm: A Theoret ical and Empirical Re-Ex am-

ination” (1991) 46 Rel. Indus. 378 at 383.

4 See Chapter 9.

The Common Law Obligat ions of the Employee51

in this respect. Although the Charter does not apply directly to private

contracts of employment, the courts have transposed its fundamental

values of fairness, equality, and proportionality into the contract of em-

ployment under the rubric of malleable contract law principles, such

as the implied duty of f‌idelity, “just cause” for dismissal, and others.5

However, an employer may sometimes sue an employee for damages

to recoup losses it has suffered as a result of the employee’s breach of

implied obligations, and may seek an injunction to restrain breaches

of particular obligations, such as the duty not to compete or divulge

conf‌idential information.

A. THE EMPLOYEE’S EXPRESS CONTRACTUAL

OBLIGATIONS: RESTRICTIVE COVENANTS

Any express terms in the employment contract regarding the employee’s

obligations to the employer will be enforced by the courts according to

their literal meaning. Only where the express terms are ambiguous can

the courts rely on extrinsic evidence, such as the parties’ past practi-

ces in interpreting contractual language. If the contractual language is

unambiguous, however, the court normally applies the terminology in

question as it stands, no matter how unfair the judge might feel the out-

come to be.6 The courts will interpret contractual language contra pro-

feren tem the interests of the employer if the clause in question appears

to be unduly onerous for the employee, normally the weaker party to

the bargain. Frequently, the employment contract will expressly state

that the employee’s obligations, along with other terms and conditions

of employment, are to be found in a personnel manual or in some other

documentation, in which case such documentation will be expressly

incorporated into the employment contract. Next, we examine the

most frequently litigated express term in the employment contract: the

“restrictive covenant.”

A restrictive covenant seeks to prevent an employee from exploit-

ing an employer’s trade secrets, conf‌idential information, or general

business goodwill, or from competing with the employer after their

employment relationship has ended. Not surprisingly, such clauses are

5 G. England, “The Impact of t he Charter on Individual Employ ment Law in Can-

ada: Rewr iting an Old Story” (2006) 13 C.L.E.L.J. 1.

6 Subject, of course, to the d octrines of unconscion ability and duress, which a l-

low unambiguous t erms to be avoided in limited c ircumstances. See C hapter 3,

Section B(3).