The departure of an employee can be an anxious time for any employer. These anxieties can increase significantly if the departing employee is leaving to work for a competitor and he or she has access to your business' confidential information. Complicating matters further is the technological ease with which disgruntled employees can wrongfully divert that important and sensitive information.
In order to quell these anxieties and ensure the protection of confidential information, many employers include confidentiality obligations in their offers of employment, which they ask prospective employees to acknowledge and accept at the outset of the employment relationship. The value provided to employers by these contractual obligations can be substantial, as a recent decision of the British Columbia Supreme Court clearly illustrates.
In this case, an employer included strong confidentiality obligations in its offers of employment, which it was then able to successfully rely upon when two employees wrongfully diverted confidential information of the business as they were departing to go work for a competitor.
Both Phoenix Restorations Ltd. ("Phoenix") and Servicemaster Disaster Restoration of Vancouver ("Servicemaster") were involved in the restoration of fire or water-damaged properties. Their businesses overlapped in some areas to the extent the two companies were essentially competitors.
In June 2014, two employees of Phoenix, a Quality Services Manager (Ms. Goddard) and a Construction Coordinator (Mr. Drisdelle), were offered positions by Servicemaster.
Both Ms. Goddard and Mr. Drisdelle were subject to confidentiality obligations that were set out in their written contracts of employment. These obligations prohibited them from engaging in any unauthorized use or disclosure of Phoenix’s confidential information, both during their employment with Phoenix and following the termination of their employment. In both cases, the employment contracts set out a specific definition of "Confidential Information".
Despite these obligations, in the period of time surrounding their resignations from Phoenix to join Servicemaster, both Ms. Goddard and Mr. Drisdelle emailed company material from their work email addresses to their personal email addresses. The material in question appeared to be Confidential Information of Phoenix as it included such documents as: lists of suppliers for sub-trades, estimates for customers, email chains between the employees and specific customers, and a key PowerPoint presentation that Phoenix used for marketing purposes.
Phoenix approached the British Columbia Supreme Court seeking a temporary injunction (pending a full hearing of the matter) to prevent both the two employees and Servicemaster from using, copying, disclosing or conveying any of Phoenix’s Confidential Information. Ms. Goddard and Mr. Drisdelle responded by arguing that what little material they took was not confidential and that, in any event, they had either destroyed it or provided it to their counsel. For its part, Servicemaster argued that it was not party to any taking of Phoenix’s Confidential Information and that it had never used any such information.
The Court’s Decision
The Court noted that because Phoenix was seeking to enforce confidentiality obligations - as opposed to more onerous non-competition or non-solicitation obligations which would restrict the future employment prospects of the employees - a lower standard of scrutiny was appropriate when assessing the contractual obligation.
Applying the traditional three-part test for an injunction to these circumstances, the Court agreed with Phoenix that, first, there was a "reasonable question for trial" based on the evidence presented by Phoenix about the diverted materials.
Second, the Court also agreed with Phoenix that "irreparable harm" was likely to result if the injunction was not granted. In doing so, the Court stated, "confidential documents being released presents an almost classic case for a finding of irreparable harm…" (at para. 30).
Third and finally, the Court agreed that the "balance of convenience" favoured Phoenix in that a critical issue was preserving Phoenix’s asserted confidentiality rights until a determination could be made at trial as to the parties’ permanent rights.
The Court also commented on Ms. Goddard’s and Mr. Drisdelle’s submissions that an injunction wasn’t necessary because they had either turned over all the material in question to their lawyer or deleted it. To this, the Court stated, "…it would be troubling to excuse a party who behaves correctly only when caught. A court should not refrain from enjoining a party as a reward for the party exhibiting tactical dexterity by returning the documents only when faced with an application for injunctive relief" (at para. 32).
In relation to Servicemaster, the Court made no finding against the company, stating that no evidence had been presented to support Phoenix’s allegation that Servicemaster had a role in the taking of the documents.
Implications for Employers
As this case illustrates, employers who have the foresight to clearly and specifically protect their confidential information at the outset of an employment relationship will reap the benefits of those efforts if they are ever required to seek relief for employee breaches of confidentiality in the future.