The American doctrine of inevitable disclosure is based on the idea that, in some circumstances, an individual’s knowledge of a company’s trade secrets may be so significant that if he or she were to leave an employer to work in a similar job elsewhere, the move would inevitably lead to disclosure of the former employer’s trade secrets in the course of performing the new tasks. Despite the employee’s best intentions, in some situations it may be unfeasible for a former employee to isolate previously obtained proprietary information when executing similar tasks in a competitive industry. This doctrine has been used to prevent a former employee from working for a competitor.
The doctrine has been a source of controversy among courts in the US, and now in Québec with the decision in Éditions CEC inc. v. Hough.
In this Superior Court of Québec case, Ms. Hough, a former employee of publishing house Éditions CEC, became the new director of editing for an English second-language educational publishing company that was a direct competitor of CEC. As a result, CEC applied for a permanent injunction to prevent Ms. Hough from participating in the creation of new English second-language educational material for this competitor business.
CEC argued that working on such a project would inevitably lead to the use or disclosure of confidential information acquired by Ms. Hough while in its employ. By doing so, Ms. Hough would undoubtedly breach both her duty of loyalty and the confidentiality agreement.
It is important to note that in this case, Ms. Hough had not signed a non-competition agreement.
Before applying the doctrine of inevitable disclosure, courts south of the border have required the former employer to establish all of the following:
- that there was bad faith or reprehensible conduct on the part of the former employee;
- that it has trade secrets to protect;
- that the former employee occupies a similar position with the new employer; and
- that the former and new employers are competitors.
In Éditions CEC, the Superior Court began its decision by finding that the above-mentioned conditions were not satisfied ? in particular, that there was no evidence of bad faith or reprehensible conduct on the part of the former employee.
The court then went on to warn that great caution must be exercised before introducing doctrines from foreign legal systems into Québec law.
The court emphasized that accepting the inevitable disclosure doctrine in Québec in a situation where the former employee had not signed a non-competition clause and had not shown any sign of bad faith would violate the underlying principles of Québec’s civil law. More specifically, it would be inconsistent with:
- the presumption of good faith on behalf of the employee;
- the obligations set out in the employment contract as negotiated by the parties;
- the fact that employment contracts do not contain implicit non-competition clauses;
- the freedom to work; and
- the freedom to compete.
As a result, the court rejected the doctrine of inevitable disclosure. In essence, the court found the doctrine to be contrary to the Québec Civil Code because it creates an after-the-fact covenant not to compete.
Lessons for Employers
If the doctrine of inevitable disclosure had been accepted by the court, it would have been another tool for employers to rely on to protect their interests when a former employee goes to work for a competitor. Since this doctrine was not accepted, employers must rely on either the protections provided for in the Québec Civil Code, or negotiate further protections into their employment agreements.
Article 2088 of the Québec Civil Code requires an employee to:
- carry on his or her work with prudence and diligence;
- act faithfully and honestly; and
- not use any confidential information he or she may obtain in carrying on or in the course of his or her work.
These obligations continue for a reasonable time after the end of the employment contract.
However, the Superior Court has confirmed that this does not prevent an employee from working for a former employer’s direct competitor in circumstances where a non-competition clause has not been signed. Further, the duty of loyalty must not and cannot be interpreted to obstruct the fundamental principles of freedom to work and to compete.
As a result, if you have an employee whose knowledge of your trade secrets is so significant that his or her departure to work for a competitor would inevitably lead to the disclosure of your trade secrets, then you should ensure that you negotiate a clear noncompetition agreement with that employee.