So you want to leave the company or organization you are at and move on to greener pastures. Perhaps you desire to be an entrepreneur, and the time has come to strike out and found your own business or join a group of like-minded individuals at a start up. Or perhaps you are seeking to shift to a new organization, either for a change of scenery or to open new horizons in your career. Mobility marks the 21st century workforce. Most people will find themselves classified as former employees on multiple occasions during their life. Yet what steps can you lawfully take when preparing to leave your current employer?
The good news is that, legally speaking, you have a robust right to move on. But as a word of advice: do not give into the temptation to gather useful bits of information you regularly use at work to aid you in your new endeavors. This includes records that you, personally, were involved in making. You can’t take it with you.
Don’t Muddy the Waters by Keeping Records
Information is so easy to copy and send these days. And you can often access it from anywhere. While this is handy, it has caused the traditional distinctions between personal versus work spaces to erode. Similarly, in many work environments the distinction between work and personal devices blurs, and key documents may well be sent to and left in digital locations you still have access to. In this environment, it can seem very normal to just keep a couple things for reference when switching workplaces, or to just keep using the same documents you always have. But don’t do it.
The legal liability issue here is that the time and effort you may save by using – or allegedly using – this type of record may change otherwise perfectly lawful, fair competition into the unfair kind. By default, employers are considered to have the legal right to control the use and further disclosure of confidential information generated in the workplace. While not all records will ultimately be held to have the necessary “quality of confidence,” you do not want to leave an opening for a disgruntled ex-boss to chase you through the court system for years while answering this question. Further, this type of misappropriation claim often results with the people associated with your new activities being named in the lawsuit on the grounds of having allegedly received confidential information. Regardless of the ultimate outcome, this kind of situation can strangle an otherwise viable business plan or career move.
The best counter to this risk is to create a clean break in terms of any documentation you have been using that is generated by or passed through your workplace. Publicly accessible industry manuals and statistics are fine; go get fresh copies and use these to recreate what you need.
Purge Your Personal Spaces and Devices
From a legal liability perspective, as part of your leaving routine I recommend having a thorough look through your personal spaces, IT accounts, and devices to purge any and all work product related material originating from or through your soon-to-be-former employer. This is particularly so if you are about to begin bidding against or moving into the same area as the organization you are departing from.
Competing with your ex-employer is perfectly legal if done right. It is, on public policy grounds, even thought of as a good thing. Yet it does pose a new challenge for your old organization, and a certain percentage of ex-bosses will feel wronged by the situation and find some reason to put a stop to it. If they talk to a lawyer, misusing secret or confidential information will be on their checklist. It is therefore prudent to remove any potential handholds a former employer may be able to find beforehand. If a resentful ex-employer tumbles to the sending or possible copying of workplace records on the eve of your new endeavours, they will be motivated to depict the mere presence of such documentation as your personal kryptonite.
Again, the wiser course is to spend the time and effort to recreate new, improved iterations of whatever materials you work with after departing using publicly available sources plus your own skill or knowledge and to take active steps to get rid of all the rest.
If this is not possible – if it feels necessary to keep and use records containing information that either cannot be recreated, or can only be recreated through a significant expenditure of skilled labour and time – this is a signal that you are on the precipice of committing a legal wrong by misappropriating confidential information. Perhaps you should reconsider your plans.
Make Your General Skills and Knowledge Work for You
The nut of the issue is that courts often find themselves wrestling with is how to balance the post-employment duty not to disclose or misuse trade secrets and other confidential information with an individual’s entitlement to carry on with their economic life. And an entitlement to continue on to greener pastures necessarily incorporates a right to use one’s general skills and knowledge, including knowledge acquired during their employment relationship.
If you suspect that separating out legally protectable trade or business secrets from non-legally protectable personal knowledge and abilities is difficult and a touch arbitrary at the margins, you are absolutely right. I heartily recommend meditating on the entire passage from Imperial Sheet Metal Ltd. et al. v. Landry and Gray Metal Products Inc., 2007 NBCA 51 (“Landry”), summarizing the post-employment obligations of non-fiduciary employees. This section traces many of the tensions at play when a court is called upon to determine fair versus unfair competition. Landry provides a window into why courts tend to use the presence of records as a marker for misappropriating trade secrets and confidential information, and why, for boundary cases that lack such a marker, courts tend to come down on the side of an ex-employee’s freedom of action. He who asserts a legal wrong must prove it, after all.
Landry’s section on post-employment obligation also includes a useful Cliffs Notes statement regarding the role that records originating from a former employment relationship play as a marker for wrongdoing:
“[C]onfidential information does not include the general skills and knowledge acquired by the employee while working for the former employer. This is true so long as the skill and knowledge is committed to memory and not dependant on the employer’s documentation. Undoubtedly, employees who depart with suitcases of documents, computer files or even a solitary customer list are in breach of their post-employment obligations. Employees who leave with only their personal possessions are better able to defend law suits alleging breaches of confidence. In sum, a former employee is entitled to exploit freely the general skills and knowledge acquired as a result of the employment relationship, so long as that knowledge is a product of his or her memory and unaided by the employer’s documentation.”
As a word of caution, I anticipate Landry’s statement of this principle holds will hold in most situations. I suspect, however, that sufficiently specific information relating to a concrete event or technical process may be held to be confidential even if it is remembered only, sans records (see below). Nonetheless, as a general rule, if a court is convinced that an ex-employee simply relied on their unaided memory in carrying out competitive activity, this is usually treated as a lawful exercise of an individual’s personal skills or knowledge. Conversely, if the same types of activities are carried out with the assistance of records originating from or through their former workplace, this is usually seen as a sign that a breach of confidentiality has occurred.
How to Lawfully Recreate Useful Information Post-Employment
Relying on Memory to Recreate Customer Lists
In addition to personal skill and memory, one is typically free to rely on one’s reputation and personal contacts. This area is trickier because fiduciary obligations or non-solicitation clauses may add some significant, if time-limited, qualifiers.
Landry fleshes out an example dealing with lawful versus unlawful use of personal contacts. As a starting point, firms cannot claim a monopoly over their customers. (At least not directly, and despite an often-intense desire to achieve just that.) It follows that a departed employee’s right to compete includes both a right to work for a competitor of their former employer, and to start their own business. Both situations often involve fishing from the same pool of customers. If an ex-employee makes use of records compiled at their former place of work – classically, a customers list – this represents a breach of confidence and unfair competition. If, instead, that same individual departed and spent a couple afternoons relying on a combination of their own memory and publicly available sources such as LinkedIn or company websites to cobble together a new customer list, this likely represents an individual’s lawful exercise of their personal knowledge.
Independently Creating Technical Secrets
A similar set of points can be made for recreating technical secrets. Suppose, for example, it would take twelve months to independently create a device or process similar to what your former organization uses. If after having parted ways with an employer or business partner, you recreate a device or process they used without accessing their records. In principle, you have a solid basis to assert that you have independently and therefore lawfully recreated a trade secret. Conversely, if you instead keep and use documents from your former workplace to save time or expense – again, this includes records you personally made – you have instead misappropriated a trade secret and committed a breach of confidence. This remains true even if the new version is not identical, but instead constitutes an iterative redesign or improvement to a type of device or service.
Incidentally, this 12-months-to-recreate situation is based on the trial judge’s finding of fact on the road not travelled in the leading Supreme Court of Canada case regarding the appropriate remedy for breach of confidence, Cadbury Schweppes Inc. v. FBI Foods Ltd.
There are, unfortunately, additional risk factors relating to an ex-employee or contractor setting out to “independently create” valuable technical secrets that closely related to one that they created or were otherwise exposed to while at a previous position. Put another way, it is less risky to engage in what I think of as true reverse engineering involving a completely different set of individuals taking apart something they can obtain on the open market. This avoids the ambiguity caused by the intermixture of personnel and their past experiences with one source of secret or proprietary information, and the new piece of information being generated.
The basic legal principles of drawing on one’s personal skills, knowledge and expertise combined with publicly available information should stand. In fact, public policy favours allowing experts to circulate freely to enable just this sort of innovative iteration within an industry, as I discussed here. Nonetheless, the courts may well probe into the suggestion that a legally distinct trade secret was truly created using one’s expertise and skill alone. It is, at minimum, prudent to set up a white room identifying all source documents or objects used to create a paper trail demonstrating a clean break in terms of source documents, and to carefully track progress. It also may be a good idea to talk to an appropriate lawyer before investing in this type of exercise.
Down the Rabbit Hole: The Unaided Memory Problem
While I would like to tie this post up with a bow, I do think I need to provide a warning about a potential rabbit hole relating to the unaided memory versus personal skill and knowledge problem alluded to above. Namely, I cited Landry for the proposition that relying on workplace documents post-employment equals breach of confidence. In contrast, the use of memory unaided by such documents equals lawful exercise of personal skills and knowledge. I do think that this distinction is an accurate reflection of how courts tend to assess evidentiary onuses, and that it will hold most of the time. He who asserts the misuse of confidential information must prove it, after all. Yet there are boundary cases where sufficiently discrete and specific information can be held confidential (i.e., its unauthorized use and disclosure is a legal wrong) even where no records are involved.
Again, the root difficulty is whether a set of information is so intertwined with an individual’s personal skills and knowledge that recognizing an employer or information “owner’s” right to it would amount to a right to fetter or control an individual who has learned that information’s ongoing freedom of action. Our legal system tends to be unwilling to allow this result on the basis of mere past contact with a source of confidential or proprietary information.
Commonwealth legal systems associates this difficulty with the influential but unfortunately phrased case of Faccenda Chicken Ltd. v. Fowler [1985] 1 All ER 724 (“Faccenda”). Faccenda drew a distinction between three classes of confidential information, and whether ex-employees are at liberty to carry out activities associated with that class of information post-employment. British commentators still use this class of information distinction when assessing secret or confidential information, although tend to drop or criticize Faccenda’s original phrasing.
- “Class 1” information is publicly accessible or is too unimportant for the law to treat it as confidential at all. It is therefore not controllable by a private party. (Faccenda refers to this as information to “trivial” to be confidential.)
- “Class 2” information is confidential, but necessarily remains in an individual’s head to some extent once they interact with it and becomes part of their personal skill and knowledge. Disclosing this type of information while still at a position may well represent a breach of an employee’s duties. Post-employment, however, the law will not generally restrict using or disclosing this information. (Faccenda refers to this category as “confidential information,” although technical know-how is clearly included.)
- “Class 3” information is “so confidential” that, even if it has been learned by heart, once an individual has left a position they may not lawfully use the secret. (Faccenda referred to this most sensitive category as “trade secrets,” which ignores business secrets and sits at odds with the baseline breach of confidence legal test used in the Commonwealth.)
More recent British commentators have proposed what I consider a more workable approach for the law of confidentiality as a whole. In essence, the proposal is to use the concept of whether an item of information is lucidly “separable” from an individual’s capacities and future activities. Sufficiently specific and concrete memories relating to a given business affair or technical steps may well be sufficiently separable that it can be justly distinguished from an individual’s future affairs. Think the particulars of a tender (bidding on the same job may be a problem), the location of a just-discovered mineral vein (restraining staking a claim in the area), or the recreation of a prototype device from your last job (recreating effectively the same prototype from memory may be a problem, even if unaided by a schematic).
Incidentally, I implicitly adopted this separable line in my post on just what makes information confidential, anyway.