The England and Wales High Court (Chancery Division) recently granted an interlocutory injunction restraining former employees from, among other things, using confidential information gained through the employer's LinkedIn groups in their new competing business.1 An employer can use groups on LinkedIn to manage and interact with its employee, customer and supplier networks. As the issue of misappropriation of employer managed LinkedIn networks and materials has not been addressed within Canada as of the date of this blog, this case from the United Kingdom is helpful in determining the application of Canadian law to this new issue and setting out some steps that employers can take to protect their confidential information.
The employer applicant, Whitmar, is a publication company. Three former employees, the defendants, left employment with Whitmar to work in their own allegedly competing business. The evidence accepted by Deputy Judge Leaver on this interlocutory application indicated that the new business had actively taken steps to compete with Whitmar before the resignation of the three employees. Whitmar commenced an action against the employees for breach of contract, breach of fiduciary duty, an account of profits, infringement of its database rights and an injunction to prevent them from using confidential information obtained during their employment with Whitmar. Specifically, in the injunction application, Whitmar sought:
- An injunction to restrain the use of its confidential information
- Delivery up of its confidential information
- A limited forensic inspection of the Defendants' computer systems
- Protection of it database rights
- Affidavits giving particulars of the wrongful activities of the Defendants
- "Springboard" relief until trial
For the purposes of this blog, we will focus on the interlocutory injunction application seeking to restrain the former employees from using the employer's confidential information. In this case, Whitmar alleged that the former employees misused its confidential information by using LinkedIn groups, which were managed on Whitmar`s computers by one of the defendants on behalf of Whitmar, for the defendants` own benefit and for the benefit of their new company. The LinkedIn groups were used for Whitmar's benefit and promoted its business. On the evidence, it appeared that the LinkedIn groups were used by the defendants as a source of e-mail addresses for a press release issued by the defendant's company.
The Court applied the principles established in American Cyanamid2to determine whether to grant injunctive relief. This led the Court to first decide "whether or not there was a serious issue to be tried and, if there is, whether damages would be an appropriate remedy, or whether the balance of convenience is in favour of granting the injunction sought"3
The decision focused on each issue raised by the applicant employer in determining whether there was a serious issue to be tried. The Court found that the use of confidential information gave rise to a serious issue to be tried, specifically mentioning the role that the LinkedIn group information played in the defendants' press release as well as the importance of information taken by two of the defendants from the employer's Circulation Database and Customer Database and business cards that were taken and allegedly copied by one of the defendants. Additionally, the desire for secrecy by the defendants and their actions while employed gave rise to the conclusion that they were taking active steps to compete prior to the termination of their employment. As a result, Whitmar was successful in their application for an interlocutory injunction restraining the Defendants from using the LinkedIn group information.
It is interesting however, that while this decision went into great detail with respect to whether there was a serious issue to be tried, the decision lacked a dedicated analysis of the appropriateness of damages and the balance of convenience.
Additionally, it is important to note that this decision does not address an employer's interest in employees' personal LinkedIn profiles, but rather in the company's own LinkedIn presence, networking and contact information.
Application in Canada
An interlocutory injunction provides unique relief that can be difficult to obtain, because the Court must make a preliminary assessment of the merits of the case before hearing all of the evidence properly presented and available for cross-examination.
The determination for an interlocutory injunction in Canada is set out by the Supreme Court of Canada as a three-stage test:
- A preliminary assessment that there is a serious question to be tried,
- A finding that the applicant would suffer irreparable harm if the application were refused,
- An assessment as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.4
This test affirmed the approach used by the Supreme Court of Canada Metropolitan Stores5, which adopted the American Cyanamid decision as law in Canada, to decide whether or not to grant injunctive relief. The fact that both the Supreme Court of Canada and Deputy Judge Leaver in Whitmar use American Cyanamid as a basis for the interlocutory relief test speaks to the relevancy of the Whitmar decision to Canadian employers.
However, the focus in Canadian case law surrounding interlocutory injunctions following RJR Macdonald has not been restricted to the first aspect of the three-stage test. Indeed, in RJR Macdonald, LeBel JA, as he then was, mentions that the threshold for the first test "is a low one".6 Therefore, depending on the circumstances, the application of the decision Whitmar in Canada may be as limited as the mere glance the decision takes on the issues of irreparable harm and balance of convenience.
Harm is irreparable where it "either cannot be quantified in monetary terms or which cannot be cured".7 Irreparable harm includes "permanent market loss or irrevocable damage to its business reputation".8 Depending on the situation, it is possible that a former employee's misuse of LinkedIn information could cause irreparable harm by soliciting a former employer's customers, employees or suppliers.
Furthermore, in general, the balance of convenience would tend to favour the granting of a LinkedIn injunction, due to the Court's desire to preserve the status quo where other factors are equal.9 Allowing an employee to use or continue to use information gained from an employer's LinkedIn network may enable him or her to change the status quo to his or her benefit.
While the Whitmar case is not Canadian law, the reasoning behind the case, the shared origin of interlocutory relief in Canada and the UK and the law surrounding interlocutory injunctions in Canada indicate an environment whereby employers may be able to gain interlocutory relief to protect themselves from employees seeking to misappropriate an employer's LinkedIn information in an effort to solicit the employer's customers, suppliers and/or employees for personal gain.
Practical Tips for Employers
In order to protect your LinkedIn network information, make sure to:
- Set clear guidelines regarding the privacy and confidentiality of your LinkedIn networking information that is communicated to anyone, employees or otherwise, who has access to this information,
- Through employment or training documents, ensure that all employees are aware of the proprietary interest that you have in all of your contact management software, which includes LinkedIn,
- Keep your company's LinkedIn groups and networking separate from employee's personal LinkedIn profiles or groups, and
- Ensure that every employee who is responsible for maintaining your LinkedIn databases and LinkedIn presence is doing so on your premises, on your equipment and for compensation as part of his or her job description.
1.Whitmar Publications Ltd v Gamage & Ors EWHC 1881 (Ch) [Whitmar]
2.American Cyanamid Co v Ethicon Ltd AC 396 [American Cyanamid].
3.Ibid at para 16.
4.RJR Macdonald Inc v Canada 1 RCS 311 at p 334 [RJR Macdonald].
5.Manitoba (Attorney General) v Metropolitan Stores (MTS) Ltd 1 SCR 110.
6.RJR Macdonald, supra note 3 at p 337.
7.Ibid at p 341.
8.Ibid at p 341 citing American Cyanamid.
9.American Cyanamid, supra note 2 at p 408.
*Nathaniel Montgomery is an articling student at McCarthy Tetrault.
To view original article, please click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.