The State of Injunctions in a post-Corona Packaging World.
Businesses and their owners, spend considerable time and resources to develop new products and to continually expand their customer base. With that in mind, it is not surprising to see great care taken to ensure such valuable, proprietary information does not fall into the wrong hands. One of the many methods that can be utilized for this purpose, is to ensure that the key employees (i.e. those with access to such sensitive, confidential business information) have an employment contract which contains enforceable confidentiality and non-compete clauses.
This article will look at the primary issues involved in obtaining an injunction against employees who leave, and complete against their former employer, utilizing their former employer’s confidential business information. In that regard, a recent decision of the Superior Court of Justice (Ontario) set out the requirements for obtaining an injunction against such employees, with the objective of protecting their former employer’s confidential business information.
The case of Corona Packaging Inc. v. Singh demonstrates the need for a properly drafted employment agreement, to establish the basis of the injunction application. By way of background, the injunction, if obtained from the court, will prevent those former employees from utilizing the ill-gotten confidential business information.
In the Corona case, the court looked at the following three part test:
1) Is there a serious issue to be tried?
2) Will the party requesting the injunction suffer irreparable harm, if the injunction is not granted?
3) Will the party requesting the injunction be more inconvenienced than the others if the decision is not in their favour?
The court established that all three of these tests must be met, in order for the court to then issue injunctive relief. In short, the court is saying that the use of the confidential information must be serious, and not frivolous or unimportant to the prior employer’s business, that permanent damage to that business would be likely if the individuals were allowed to utilize the confidential business information, and that (on balance) the former employer’s business would be more inconvenienced.
In Corona, the court found that Corona may have gone bankrupt if the former employees were not prevented from utilizing its confidential business information, and that the new business would not have had the opportunity to obtain the new business contract, had it not been for their prior employment positions with Corona. In that basis, the Court granted the injunction preventing Corona from using the confidential business information and competing against Corona until the case is heard.
In conclusion, because the Court requires the employment contract provisions to be clear and reasonable (as they operate to limit terminated employees from obtaining future employment), a well drafted employment agreement will address issues of non-solicitation, confidentiality and non-competition, in a manner that precisely focuses on the employer’s business, which will result in an enforceable contract, and the proper protection of the employer’s confidential business information.