Canada: La Protection Des Secrets Commerciaux À La Suite Du Départ D'Employés Clés

Last Updated: January 19 2018
Article by Josée Gervais

Workforce mobility is constantly on the rise and it reminds employers that, in many cases, their employees' know-how figure among their company's most significant assets. This realization is accompanied by an important consideration, namely that employers must constantly remember that their company could suffer should an employee choose to leave them and work for a competitor.

Indeed, the times when employees refrained from joining the ranks of a competitor by virtue of their unfailing loyalty toward their employer are long gone. Workforce mobility has now gone from the exception to the norm, and employers must consequently manage and protect their trade secrets.

Courts have recognized the fundamental value of the corporate assets that are trade secrets, as well as the corollary obligation of employees to respect their confidential nature.

Labour laws will generally define trade secrets as a form of confidential information to which an employee may have access within the scope of their duties. However, not all confidential information constitutes a trade secret. For example, a trade secret is a secret manufacturing formula or process that is unique to the employer and that was revealed in secrecy to the employee for the sole purpose of having the latter manufacture whatever it is that can be made with this secret. Chemical formulas, recipes or manufacturing processes that require one to know the exact quantities of the products used in the manufacturing, how to use them so that the desired reaction may be achieved and the degree of temperature required to induce the intended reaction can also be considered as trade secrets.1

In a larger sense, confidential information, such as unpublished financial statements, client lists, marketing strategies and internal memos regarding upcoming transactions or business opportunities can also be somewhat protected.2 However, employers should be aware that not all practical information that pertains to a company and that may be useful to one of its competitors will be deemed as confidential information:

"The methods used to compete against a competitor are not in themselves confidential information if they do not include characteristics that are absolutely specific and unique to such company and if no measures were taken to treat them as such.3  "[Translation]

In order to protect the corporate assets that are trade secrets, it is in the best interest of employers to do all things necessary to eliminate any doubt—for the employees who have access to the trade secrets and for the courts seized with a dispute regarding their disclosure—that they are indeed trade secrets. Many elements will be analyzed by the courts in order to recognize the existence of a trade secret:4

  • The extent to which the information is known outside the company;
  • The extent to which the information is known by employees and other individuals implicated in the company;
  • The extent of the measures deployed to protect the secrecy of the information;
  • The value of the information for the owner of the trade secret and for their competitors;
  • The amounts invested in the development of the information;
  • The ease or the difficulty with which the information can be correctly acquired or reproduced by others;
  • The extent to which the owner of the trade secret and the employee to whom it was disclosed treat the information as secret.

Protection of confidential information and secrets

Ideally, an employer concerned with protecting their trade secrets should make all employees who have access to them sign a confidentiality agreement or a non-disclosure agreement. The signing of a non-competition clause may also be appropriate, namely in cases where employees who, due to their position, gain a certain access to the company's trade secrets such that if they left the company to join a competitor, the employer would suffer significant or even irreparable damage.

By definition, a non-competition clause is a clause by which an employee commits, should they leave the company, to not work independently or for another employer in the same field as their former employer.

Section 2089 of the Civil Code of Québec ("CCQ ") stipulates the conditions that any non-competition clause must satisfy in order to be valid and a source of obligation:

  1. The clause must be included in a written contract;
  2. The employee's commitment not to compete with their employer in the event of the termination of their contract must be stated in express terms;
  3. The clause must be limited in time and specify a location and a type of work;
  4. The clause must be reasonably limited to what is necessary to protect the employer's legitimate interests.5

Therefore, a non-competition clause must reconcile the employer's need to ensure their own protection from a commercial standpoint with the former employee's need to be mobile within the job market following the termination of their employment.

Upon its enforcement by the courts, a non-competition clause considered unreasonable will be declared void and therefore be deemed non-existing, in which case the judge will not be authorized to amend or adjust the clause, e.g. by decreasing its term or by limiting its jurisdiction.6

In the absence of a contractual agreement, the employer is somewhat protected by the duty of loyalty that is imposed on all employees by virtue of section 2088 of the CCQ.

This legal duty of loyalty does indeed impose on the employee restrictions with regard to the nature and the extent of the information that they may use after their departure and aims to proscribe unfair competition in which the employee may partake following their departure.

The duty of loyalty applies to all employees, regardless of the position they occupied. It is effective during the employment and remains so during a reasonable period of time following the termination of the employment contract. According to case law, while the reasonable period time referred to in section 2088 of the CCQ may vary depending on the position occupied by the employee in question, it shall not exceed a few months, as established by the Quebec Court of Appeal:

"The duration of the post contractual duty of loyalty depends on the circumstances in each case, but rarely exceeds a few months. There may be exceptions, but they are just that and must remain so if one does not want to unduly limit the principle of competition that governs our society and advantages employers to the detriment of employees."7

An employer who accuses a former employee of having failed to carry out their duty of loyalty must remember that, depending on the court and notwithstanding the duty of loyalty, the purpose of the principle of free competition is to allow a former employee to compete freely, even vigorously and aggressively, against their former employer.8

Therefore, the duty of loyalty stipulated in section 2088 of the CCQ is interpreted in a restrictive manner, as the survival of a contractual obligation beyond the end of the contract that gave rise to it is outside of civil law and, within the organization of our society, competition in business is the rule.9

Finally, employers must keep in mind the fact that there is a thin line between, on the one hand, confidential information belonging to a company that remains protected by virtue of the duty of loyalty and, on the other hand, the personal knowledge and skills that an employee has acquired throughout the years and is entitled to bring to a competitor.10

Footnotes

1 Positron Inc. c. Desroches, J.E. 88-757 (C.S.). Id., p. 41-42.

2 Hélène OUIMET, Travail plus: le travail et vos droits, Montréal, 2016, 9th edition, Wilson & Lafleur, online: https://edoctrine.caij.qc.ca/wilson-et-lafleur-livres/130/1661217130; Gestion Marie-Lou (St-Marc) inc. c. Lapierre, D.T.E. 2003T-864 (C.A.), para 39 to 42.

3 Improthèque Inc. c. St-Gelais, [1995] R.J.Q. 2469 (C.S.)  p. 13.

4 Montour Ltée c. Jolicoeur, EYB 1988-86760 (C.S.).

5 See, for example, the case 4388241 Canada inc. c. Forget, 2012 QCCS 3103, in which a twelve-month non-competition clause that aimed to prevent an employee from working anywhere in Quebec and in Ontario was deemed invalid.

6 Restaurant Chez Doc inc. c. 9061-7481 Québec inc., J.E. 2006-202 (C.A.), para 29.

7 Id., para 42.

8 9129-3845 Québec inc. c. Dion 2012 QCCA 1276, para 15.

9 Concentrés scientifiques Bélisle Inc. c. Lyrco Nutrition Inc., 2007 QCCA 676 (CanLII); Redtech inc. c. Leblanc, 2017 QCCS 4348 (C.S.)

10 DK-Spec c. Bouchard, EYB 2005-97935, para 46 (C.S.); Gilles Michel inc. c. Michel, 2006 QCCS 5084

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Bereskin & Parr LLP
Norton Rose Fulbright Canada LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Bereskin & Parr LLP
Norton Rose Fulbright Canada LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions