Restrictive Covenants - Detailed Analysis

Last Updated: October 2022

(f) Confidentiality Covenants

As the least intrusive restraint of trade, restrictions on disclosure of confidential information are often upheld, but even here a clause may overreach if it purports to make confidential a matter which is in the public domain.  For instance, an obligation not to “disclose the business” of the former employer and a prohibition from using any information acquired “concerning the operation of” that employer was held, on an application for an interim injunction, likely to be unenforceable.  The court found that the clause imposed “an open ended obligation of confidentiality respecting matters which are public knowledge, such as its office hours or its banker’s name (which would be apparent on cheques received from the employer).1

A confidentiality covenant cannot prevent an employee from using the skill and knowledge developed while employed for the benefit of another employer.  Here, the distinction between skill and knowledge of a trade or profession as opposed to confidential information or trade secrets is critical.  The law was aptly summarized by the House of Lords in Herbert Morris v. Saxelby more than 100 years ago in the following passage which remains fully applicable to this day:

That doctrine does not mean that an employer can prevent his employee from using the skill and knowledge in this trade or profession which he has learnt in the course of his employment by means of directions or instructions from the employer. That information and that additional skill he is entitled to use for the benefit of himself and the benefit of the public who gain the advantage of his having had such admirable instruction. The case in which the Court interferes for the purpose of protection is where use is made, not of the skill which the man may have acquired, but of the secrets of the trade or profession which he had no right to reveal to anyone else – matters which depend to some extent on good faith.2

It is not uncommon, in employee competition litigation, for a departed employee to be in unlawful possession of confidential documents of the former employer. The question then arises as to the disposition of the documents, given their relevance to the employer’s claim for breach of confidence. In an Ontario case where the defendants produced confidential documents of the plaintiff, some of which they relied on in response to a Mareva motion, the court declined to order the return of the confidential information, as there was no suggestion the defendants intended to use the documents other than in the proceeding. The court instead ordered the defendants keep, without deleting, any of the documents and to maintain their confidentiality.3
  1. Canadian University Press Media Services Ltd. v. Pleasants, 2000 CanLII 22599 (ONSC), at para. 15.
  2. Herbert Morris Limited v. Saxelby, [1916] 1 A.C. 688, at p. 704.
  3. Voysus Connection Experts Inc. v. Shaikh, 2019 ONSC 6683, at paras. 43-48. While the case concerned allegations of fraud, not employee competition, the court relied on a confidentiality covenant in arriving at its decision.