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Labour & Employment Law Blog

Confidential Information and Departing Employees

Confidential information is a subject matter that concerns many of our clients – on the employer and employee side alike. The average employer will wish to impose as many restrictions as possible on the use of the information obtained in the course of an employee’s employment and classify what “confidential” means as broadly as possible.

Conversely, the departing employee will typically wish to set as few limitations as possible in terms of what they can and cannot do with the information that they have obtained in the course of their employment. Confidential information usually becomes a triggering issue following the employee’s departure, especially when the employer learns that there was a potential (or perceived) breach of the employee’s obligations to the employer in that regard. In our experience, the employer will normally first send a “cease and desist” letter demanding that the employee stops from misusing the company’s information. Where the letter proves insufficient and the employer begins to experience financial harm, the employer will sue and bring a motion for injunctive relief against the employee to prevent further misuse of confidential information through the court. In plain English, the employer will seek an order from the court confirm that the information being used is confidential and that its use by the former employee needs to be barred.

So how do the courts deal with companies that seek to prevent misuse of confidential information by departing employees? The courts’ approach is to undertake a detailed analysis of the information the employer seeks to protect because the bar for injunctive relief is high. For an employer to be successful in obtaining an order from the court, the employer will have to identify with precision which information is confidential, and which Is not. Likewise, companies must not confuse “confidential information” with “know-how.” “Know-how” is a derivative of an employee’s knowledge, professional practice and skills that can be generally replicated in practice. In such an instance, the employer has no control over that type of information and it cannot classify the aforementioned as “confidential.” Nor can the employer make bald assertions that there was a breach of confidential information – a successful injunction will require particulars of what information was confidential and what breached transpired.

When deciding whether the information ought to be protected through an order, the court will further consider whether the information has the necessary quality of confidence; whether the information was communicated in confidence; and if the information is being used to the detriment of the owner of the information. To the determine whether the information has the necessary “quality of confidence,” courts will consider the extent to which the information is known outside the business and the extent to which it is known by employees and others who form part of the business; the measures the organization took to protect the information; the value of the information to the organization and to its competitors; the effort and finances that were expended in developing the information; the ease or difficulty with which the information can be acquired or duplicated by others; and, whether the holder and taker of the secret treat the information in question as secret.

Once the court has assessed the above factors, even if the court decides to issue a protective order, the order will not necessarily cover all of the information in question. For instance, the court may issue an order with respect to information that is sufficiently particularized as confidential only and leave the rest of the information without any protection at all.

The protection of business information is a delicate area of law that requires careful consideration at the outset. It is imperative for businesses that seek to protect information to protect information in a manner that is balanced and not overreaching. Classification of all information as “confidential” will result in the court’s rejection of the argument and a refusal to protect information from the organization’s competitors and the public at large.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.