Employee’s General Knowledge Is Their Own To Exploit

Categories: Blog, Employment Law

The battle between employers and their former employees over the individual’s right to engage in post-employment competition is an ongoing one.  While court decisions seem to sway back and forth, favouring one side or the other at various points in time, one area which consistently favours the individual relates to exploitation of her general knowledge of the industry. 

The scenario in which this question must be answered is fairly common – an employee leaves his long-time employer and obtains employment with a competitor in the same industry.  The former employer feels vulnerable to competition by the individual because that person has acquired a range of information about the industry, the company, and its customers. 

Employers have certain tools available to minimize the impact of employees joining a competitor.  Contractual agreements containing non-competition and non-solicitation covenants are the obvious examples.  But, most employers don’t make use of such agreements (or, if they do, have implemented versions which could never be enforced in court).

The Courts, most recently the New Brunswick Court of Appeal, have determined that employees do not breach any implied duty of confidentiality by using general knowledge of the industry and of customer information and preferences to solicit their business on behalf of a new employer.  Preventing former employees from exploiting their general knowledge would conflict with their legal right to compete with their former employer and to solicit the same customers within that industry.  

What are the lessons to be learned, here, by employers?  First, the trend towards giving former employees more freedom to compete seems to be continuing, so they should get accustomed to it. 

Second, if they wish to have a hope of limiting the post-employment activities of their employees, they should get some expert advice on implementing reasonable restrictive covenants.  Third, and most important, if their employees are likely to be that much of a threat as competitors, they should consider investing more time and resources in keeping them!