Disgruntled oilfield employee free to compete with former employer: Court

Customer information employee used in competing business was common knowledge and new company’s success was result of aggressive, not unfair, competition
|employmentlawtoday.com|Last Updated: 07/31/2012

ADM Measurements provided instrumentation and electrical repair services to oil and gas companies and was based in Valleyview, Alta. Many of its employees were actually journeymen technicians who worked as independent contractors, though they appeared to clients as ADM employees.

Greg Young was a journeyman electrician who started working for ADM as an independent contractor in 1997, through Young’s own incorporated business. When we started with the company, it was agreed he would help build ADM’s business and eventually purchase it. Several months later, they reached an informal agreement where ADM would pay Young a flat monthly fee to be ADM’s manager, with Young’s company sharing in a part of ADM’s profits if certain income criteria were met. This would last for five years, at which point Young would purchase ADM.

However, in September 2000, the relationship between Young and ADM’s owner broke down. Young was told ADM was going to be sold to someone else. Young stopped working for ADM and returned any of its property that he had. Young started his own company with a business partner, Bullet Energy, that performed electrical services and competed directly with ADM. Young also hired some employees away from ADM. Bullet Energy became successful and ADM’s business decreased.

ADM sued Bullet Electric and Young for breach of fiduciary duty by using ADM’s customer list, key contacts and knowledge of the sites and systems of ADM’s customers. ADM also claimed Bullet Energy, Young and his business partner unfairly interfered with its contractual relations with its customers and employees.

The court found Young was an ADM employer, rather than an independent contractor, because his management duties were under ADM’s control and part of ADM’s business, he used ADM supplies, he alone supplied his services to ADM, and he received a fixed salary from ADM without any independent risk for expenses.

However, the court also found Young was not a fiduciary of ADM because, although a manager, he was not part of the “core administration” of the company. He was a “high-level tradesman” who reported to ADM management and not a decision maker, said the court.

The court also found the information Young had of ADM’s clients was not confidential information that would unfairly hurt ADM’s business. The customer list was a list of oil and gas companies that could easily be found in other places and Young already knew “where the work was,” said the court. Young simply approached the companies because they were part of the customer pool.

“This is not the kind of special knowledge that strikes at the competitive advantages of a former employer,” said the court. “It was not specialized and proprietary technical knowledge, or intimate knowledge of future undisclosed business strategies and fiscal states.”

The court also found there was no evidence of any agreement restricting Young’s ability to compete with ADM, nor were there any existing contracts between ADM and its customers that Bullet Energy interfered with — typical work in the industry was for individual jobs on a case-by-case basis. And without evidence of direct solicitation of ADM employees that could be considered inappropriate, Bullet Energy was entitled to offer jobs to former ADM employees, said the court. At any rate, the court found ADM’s change of its five-year agreement with Young amounted to constructive dismissal and would have eliminated any fiduciary duty Young had.

In addition, ADM’s decreased business was not from unfair competition, but rather from Bullet Energy “outhustling” ADM for customers.

The court dismissed ADM’s claim, finding that Young and Bullet Energy, were entitled to freely compete with ADM. ADM was also ordered to pay Young
$176,387.35 for his bonuses in 1998, 1999 and 2000.

For more information see:

ADM Measurements Ltd. v. Bullet Electric Ltd., 2012 CarswellAlta 302 (Alta. Q.B.).

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