Northern Exposure

Employer obtains injunction to prevent misuse of its confidential information

by David McDonald

When an employee announces that he or she is resigning in order to go work for a competitor, it is only natural for an employer to become anxious—particularly when the departing employee has access to the business’s confidential information. Complicating matters further is the technological ease with which an employee can wrongfully divert an employer’s confidential information if he or she wishes to do so.

One way in which many employers attempt to protect their confidential information is by including strong 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 the recent decision of the British Columbia Supreme Court in Phoenix Restorations Ltd. v. Drisdelle, 2014 BCSC 1497 (CanLII) 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 to work for a competitor.

Facts

Both Phoenix Restorations Ltd. and Servicemaster Disaster Restoration of Vancouver 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 (Samantha Goddard) and a construction coordinator (Derek Drisdelle), were offered positions by Servicemaster.

Both Goddard and Drisdelle were subject to written 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 Goddard and Drisdelle e-mailed company material from their work e-mail addresses to their personal e-mail 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, e-mail 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 the two employees from using, copying, disclosing, or conveying any of Phoenix’s confidential information.

Court’s decision

The court noted that because Phoenix was seeking to enforce confidentiality obligations—as opposed to more onerous noncompetition or nonsolicitation obligations that would restrict the future employment prospects of the employees—a lower standard of judicial 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 ….”

Third and finally, the court agreed that the “balance of convenience” favored 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 Goddard’s and 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.”

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.