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CIBC Mellon Global Securities Services Company v Baltman, 2019 CanLII 51825 (ON LRB)

Date:
2019-05-30
File number:
2542-18-ES
Citation:
CIBC Mellon Global Securities Services Company v Baltman, 2019 CanLII 51825 (ON LRB), <https://canlii.ca/t/j0w0x>, retrieved on 2024-03-28

OLRB Case No:  2542-18-ES

 

CIBC Mellon Global Securities Services Company o/a CIBC Mellon, Applicant v Stuart Baltman, and Director of Employment Standards, Responding Parties

 

Employment Practices Branch File No 70205618-5

 

 

BEFORE:  Harvey Beresford, Vice‑Chair

 

 

APPEARANCES:  Todd Weisberg, counsel, Muna-Al-Joulani, vice-president of human resources, Mackenzie Anderson, articling student appearing for the applicant; Simone Ostrowski, counsel, Stuart Baltman, Tommy Hung, articling student appearing for the responding party Stuart Baltman; no one appearing for the Director of Employment Standards

 

 

DECISION OF THE BOARD:  May 30, 2019

 

 

1.                 This is an application filed under section 116 of the Employment Standards Act, 2000, S.O. 2000, c.41, as amended (the “Act”) for review of Order #80067740-OP in the amount of $28,019.19 in wages for Claim #70205618-5 and $2,801.91 in Administrative Costs.

 

2.                 The applicant alleges that the responding party Stuart Baltman (Baltman) was terminated for wilful misconduct, disobedience or wilful neglect of duty that is not trivial or, in the alternative, he resigned his employment with CIBC Mellon.

 

3.                 Baltman had been employed for 5 years and 3 days at CIBC Mellon and at the time of his departure held the position of Assistant Vice-President, Program Management and Improvement.  CIBC Mellon has approximately 1400 employees of which around 1000 are in the Operations Group.  Baltman was generally responsible for strategic initiatives with respect to process improvement and re-engineering primarily within the Operations Group and dealing with client satisfaction and cost efficiencies.  He ran a number of project teams and did not directly interact with clients with minimal exception. An example of a strategic project led by Baltman was the Performance Enhancement Program intended to track and enhance individual trader performance. He had one direct report and reported directly to Richard Anton (Anton), the Chief Operating Officer of CIBC Mellon.  Baltman was a member of Anton’s Leadership Team and would attend bi-weekly team meetings where they would discuss business strategy, projects in the pipe-line and business transformation strategy.  According to the testimony of CIBC’s Vice-President of Human Resources, Muna Al-Joulani (Al- Joulani), he would be privy to confidential information and involved in strategic planning at the COO level.  This information would be valuable to competitors as it concerned matters such as how CIBC Mellon client relationships are structured and the types of approaches it makes to potential clients.

 

4.                 Baltman, like all other CIBC Mellon employees, was bound by the corporate Code of Conduct that provides, inter alia, “employees are expected to…follow this Code, including respecting both the letter and spirit of the Code.” In addition, it clearly states that Contravention of the Code may result in disciplinary action up to and including termination for cause.  The following excerpts from the Code are significant:

 

         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.  (In Baltman’s case, that would be the Chief Operating Officer)

 

5.                 The Code also contains provisions with respect to “Outside Activities” which generally relate to activities that are not obvious conflicts of interest, such as volunteering, supporting registered charities and the like. Before engaging in any such activity, “employees are expected to identify and avoid any outside interest or activity that will interfere with their duties at CIBC Mellon.” The Code also allows employees to participate in outside business activities by taking another job, being self-employed or becoming an owner in some other business as long as they obtain prior approval (my underlining) by following a prescribed procedure in order to ensure that there is no conflict of interest.

 

6.                 There is no doubt that CIBC Mellon takes conflict of interest and professional behaviour very seriously. Additionally, the Code requires that “all employees must act honestly and with integrity at all times.”

 

7.                 The facts that gave rise to Baltman’s departure from CIBC Mellon were provided in the evidence given by two witnesses, Al-Joulani for the applicant and Baltman on his own behalf.  Baltman accepted an offer of employment with RBC Investor & Treasury Services (RBC) on or about April 18 or 19 according to Baltman. It was for a position similar to the one he held with CIBC Mellon. RBC is one of two main competitors of CIBC Mellon and, unbeknownst to CIBC Mellon, he had been in discussions with RBC regarding new employment for a number of months prior to accepting the offer.   Baltman testified that he had also been offered a new role with CIBC Mellon but found it not satisfactory as it was still at the AVP level and he believed it should be a VP level position.  This new CIBC Mellon position was leading a new client experience initiative that would be looking at the future vision and mandate for the business. Once Baltman had accepted the RBC employment offer, he elected to not tell anyone at CIBC Mellon and intended to wait until May 18 when he would give 2 weeks notice since his new RBC job didn’t start until June 4th

 

8.                 Unfortunately for Baltman, late in the afternoon of April 23rd  Al-Joulani received an email from RBC requesting employment verification for Baltman as part of a background check.   She didn’t know any particulars regarding the request but believed it was about working for RBC so she emailed Baltman early the next morning asking to meet as soon as possible.  Baltman was not available on the 24th but they agreed to meet in the morning of April 25.  At that meeting, Al-Joulani asked Baltman if he had obtained alternate employment with a competitor.  She testified that he seemed a bit surprised and asked if he had to tell her.  She said yes and he identified RBC and said he wasn’t planning on resigning until June 6 or 8 (she couldn’t remember the exact early June date).  Al-Joulani told him he couldn’t stay because he was going to a direct competitor and he didn’t seem surprised to hear what she said.  She informed Anton of the situation right away that morning, and he met alone with Baltman. According to Baltman, the two had an amicable meeting after which he retrieved his personal items from his office and was escorted out by Al-Joulani. She described the process as “standard protocol” in these situations.

 

9.                 In cross-examination, Al-Joulani said that in cases where persons in leadership roles (as was Baltman) say they are leaving and not going to a competitor, they would discuss departure arrangements and notice.  If the employee is going to a competitor, the employee leaves immediately and they generally pay the “notice period”.  Baltman was offered the same arrangement but he declined and insisted he was not resigning. Al-Joulani also said that in similar situations where the employee is going to a competitor they don’t want any transition period.  It is not a conflict of interest to interview for another position but accepting employment with a competitor is a conflict of interest and departure the same day is required.  There have been a number of situations where this has happened and she knew of no situation where the employee has not immediately disclosed acceptance of alternate employment.

 

10.              In his examination in chief, Baltman admitted that from time to time he was privy to information of a “sensitive nature” but he would always maintain confidentiality.  He didn’t think it was a conflict of interest to accept a position at RBC – “I have a high standard of conduct and would never share confidential information”.  For the same reason, he stated that it was not a breach of the Code of Conduct to accept a job at RBC because he would never breach any trust. However, he had been previously asked if he was “in a special position of trust” and he replied that he didn’t know what that was and he did not consider himself in a position of trust. Baltman confirmed that he told Al-Joulani he was not resigning.  He told that to Anton as well and said he was willing to continue working until June.  Baltman then testified that he wanted to co-ordinate his departure with the arrival of his new boss at RBC when he would begin working there in June.  He was not sure that he told that to anyone at CIBC Mellon.

 

11.              The cross-examination of Baltman was interesting. He acknowledged that he was in a senior role and attended senior leadership meetings from time to time where discussions included client opportunities, internal improvements and information that was confidential and sensitive. He agreed that CIBC Mellon has a legitimate interest in protecting and ensuring that its information and processes are not shared with a competitor.  He said he read and “fully understood” the Code of Conduct, understood that CIBC Mellon took compliance with the Code “very seriously” and that contravention could mean termination.  He agreed that employees should not put themselves in a position of conflict of interest but he “interpreted” the outside activities provisions to apply only when he “accepted and started” with a competitor.  He added that he didn’t share his interpretation with anyone at CIBC Mellon.  Baltman acknowledged that when CIBC Mellon finds out that someone is going to a competitor they get “walked out” and he didn’t want that to happen to him.  For him, it was an exercise in “balancing the interests of a number of stakeholders”.  Baltman didn’t want to tell CIBC Mellon that he had accepted the offer until May 18 and he was going to continue working and showing up at meetings.  When asked about leadership meetings, he said he wouldn’t show up there and “they wouldn’t raise a single eyebrow”. When asked why he didn’t tell them about accepting the RBC offer, he said he was concerned that he wouldn’t be able to hand off properly before leaving. 

 

12.              His cross-examination concluded with Baltman saying that he didn’t believe he had any obligation to tell CIBC Mellon that he had accepted employment with a competitor.  When asked if he thought CIBC Mellon wouldn’t care about you having accepted an offer with RBC, Baltman responded, “Interesting word “care”.  I would not have done anything to harm CIBC Mellon.”  He did not otherwise answer the question.

 

ARGUMENT

 

13.              Counsel for CIBC Mellon submitted that Baltman, as a senior member of management and a member of the leadership team with access to sensitive and confidential business information, had a clear obligation to disclose his acceptance of employment with a major competitor.  He was familiar with the Code of Conduct and its requirements and stated that he fully understood all of the code.  He knew that breach of the Code was grounds for termination.  He also knew that the practice of the employer was to terminate/“walk out” senior employees who had accepted employment with a competitor and he didn’t want that to happen to him.  The Code is clear in its requirement that an employee wishing to engage in any other employment must first obtain approval from CIBC Mellon. He had no intention of advising CIBC Mellon that he had accepted employment with RBC for his own reasons and only when he was “caught” by the employment verification request from RBC did his new employment come to light.  Baltman lied by silence and his wilful failure to disclose is both a beach of trust and a direct conflict of interest contrary to the Code of Conduct.  Additionally, Baltman was a senior employee considered to be trusted and valuable to the business.  As such, he was in a fudiciary relationship with CIBC Mellon.  He breached that relationship by failing to act honestly by not disclosing his acceptance of employment with a major competitor.

 

14.              In support of his argument, counsel for provided me with case law and I will refer to the decisions that have assisted me in coming to a decision.  In Rajput v Menu Foods Ltd., 1984 CarswellOnt 759, [1984] O.J. No. 2290, a vice-president was terminated for just cause when he failed to disclose he had received a job offer from a competitor and led the president to believe he was continuing in employment.  The court found that the failure to disclose was a lie and a breach of trust and that the VP acted for the sole purpose of benefiting himself and not his employer. T.N.T.Canada Inc.-Overland Express and Gyurindak, 1997 CarswellNat 4991 is an adjudication under the Canada Labour Code challenging the failure to pay termination pay to an employee who was terminated without notice pay after advising the employer that she had accepted a position with another company but refused to name her new employer.  The adjudicator determined that the employee was not entitled to any notice pay because she had misled the employer by her deliberate silence. In Polaris Computer Systems Ltd., (Review of Order to Pay No. 01462 dated August 2, 1985, File #053825) the Ontario Employment Standards Referee held that, “Depending on the seriousness of the situation, an employee who engages in actions which are in conflict of interest with his or her employer can be guilty of wilful misconduct within the meaning of…the Act.”

 

15.              The issue of fiduciary relationship and obligations is dealt with in Felker v. Cunningham, 2000 CanLII 16801 (ON CA), [2000] O.J. No. 3177 wherein a valuable and trusted employee of the employer prepared a presentation for a third party company with the intent of starting his own business and competing with his employer.  The Court of Appeal held that he breached his duty of good faith when he failed to make full disclosure to his employer and was terminated for just cause.  At paragraph 14 of the decision, the court said as follows:

 

“Since Canadian Aero it has been established law in Canada that high echelon managers and directors of an organization owe their employer a fiduciary obligation that transcends their implied duty of fidelity as a regular employee.  Thus, an employee who stands in a fiduciary relationship to his or her employer has an equitable obligation of loyalty, good faith, honesty and avoidance of conflict of duty and self-interest.  The employee must act honestly, in good faith and with a view to advancing the employer’s best interests.  This court has held that fiduciary employees cannot enter into engagements in which they have a personal interest that conflict with anything the employer does, or realistically may do, without first making full disclosure and obtaining the employer’s consent: Manley Inc. v. Fallis (1977), 2 B.L.R. 277.” 

 

The employer in the Felker decision was a sales agent for manufacturers of electronic components and the employee was the Toronto area sales manager.  The court also said that the only way the employee could have pursued starting his own business would have been to make full disclosure to the employer and obtained its consent to do so.

 

16.              Counsel for Baltman submitted that at no time did he intend to resign prior to early June and that he was terminated without having committed any wilful misconduct.  At worst, there is a breach of policy or a conflict of interest.  Counsel stated that the onus is on the applicant employer to prove its case and referred to the “five part test” set out in Favuzzi v Ontario Lottery and Gaming Corporation (OLG), 2015 CarswellOnt 1358, a review application dealing with the non-payment of termination pay under the Employment Standards Act, 2000.  This case cited with approval Scherling v. Martin Pet Foods, [2002] O.L.R.B. Rep. 41 (Ont. L.R.B.) wherein the Board said the following about using the exemption of wilful misconduct to not pay termination pay:

 

“In order for an employer to have this exemption apply, they must establish that 1) the rule must be clear and unequivocal 2) it must have a substantial bearing on the employment relationship 3) the rule must have been communicated to the employee 4) the employee must know (or ought to know) in advance that the conflict could result in his or her termination and 5) the rule must not require the employee to do anything unsafe.”

 

Counsel argued that none of the five points applied with respect to Baltman.  There is no rule that says an employee must disclose acceptance of employment with a competitor and no CIBC Mellon document that says he will be dismissed if he does accept such employment.  Further, Baltman testified that he did not disclose any confidential or sensitive information to RBC so there is no harm.  Counsel submitted a number of cases that support the principle that looking for alternative employment is not grounds for dismissal and I agree with that submission.  Finally, I was presented with case law regarding voluntary quit or resignation.  In view of the Board’s decision, it is not necessary to consider this issue.  Baltman did not have any intention to resign and leave the employ of CIBC Mellon until the last workday prior to June 4th when he would have begun his new employment with RBC.

 

DECISION

 

17.              The Board finds that Baltman was terminated by CIBC Mellon for engaging in wilful misconduct within the meaning of sections 2(1)3 and 9(1)6 of O.Reg. 288/01 of the Act.  Accordingly he is not entitled to either termination pay or severance pay under the Act.

 

18.              Baltman accepted employment with RBC and intentionally chose not to disclose his acceptance to CIBC Mellon so that he could continue to work up to the last day prior to the start of his employment with RBC. Baltman was also aware of the CIBC Mellon practice of having senior employees who accept employment with a competitor leave immediately and, as Baltman put it, be “walked out.”  He said he didn’t want that to happen to him and therefore elected to remain silent and accept the risk that they wouldn’t find out.  Even without the evidence of the Code of Conduct and its content, the Board has no difficulty in finding that Baltment intended to deceive CIBC by withholding his acceptance of RBC employment.  He was at all material times in a fiduciary position as an AVP, a senior employee, a member of the leadership team and in possession of confidential and sensitive business information. He would have been well aware that CIBC Mellon would expect him to disclose his new employment and leave immediately.

 

19.              The Code of Conduct is clear in a number of areas that any potential or actual conflict of interest is to be disclosed. Accepting employment with a major competitor is a conflict of interest.  The Code defines conflict of interest as a person having two interests that are inconsistent.  A “perceived conflict of interest will occur when a reasonable person would believe a conflict could or has occurred”.  It goes further and sets out the process to be followed in cases of a conflict of interest by stating that where employees are unclear whether a conflict exists, they are required to discuss it with their manager and in the case of Baltman, that would have been Anton, the COO.  The Code continues to stress the importance of disclosing real or potential conflicts of interest in the sections dealing with Outside Activities and Limiting Outside Business Activities.  Finally, the essence and indeed the heartbeat of the entire Code is set out in the sentence, “All employees must act honestly and with integrity at all times.”  The Board finds that Baltman put his own interests first and hoped to remain gainfully employed at CIBC Mellon until he started at RBC, all without missing a pay cheque.  It is somewhat ironic that his intentions were unwittingly defeated by his new employer sending what appeared to be a routine employment verification inquiry to CIBC Mellon.

 

20.      The Board finds that the five points required to support a finding of wilful misconduct as set out in Favuzzi, supra, have been satisfied.  The requirement to disclose a conflict of interest is clearly set out in the Code; his accepting employment with a major competitor has a substantial bearing on the employment relationship, the disclosure requirement was clearly communicated to Baltman and, as he testified, he was well aware of the consequences of not disclosing; he knew he could be terminated and he was not required to do anything unsafe.

 

21.              Baltman was terminated for failure to disclose the conflict of interest in accepting the RBC employment and attempting to conceal it from CIBC Mellon.  It is important to note that he was not terminated for seeking employment with RBC or even, in this particular fact situation, for accepting employment with RBC. The Board finds that his actions constituted wilful misconduct.  The applicant is successful.  Order to pay #80067740-OP is rescinded and the Director of Employment Standards is directed to return all money held in trust to the applicant, CIBC Mellon, in the normal course.

 

 

 

Harvey Beresford

for the Board