Workplace lawsuits over trade secrets

Hair Salons battle over staff and client secrets – Reported in the National Post, Friday, June 19, 2009

There is a 6.4 million dollar lawsuit between Yorkville, Toronto, hair salons in a case that considers whether former employees have improperly taken trade secrets, such as hair-dye formulas and client lists.

As reported in the national post, the oowner of Glo Salon and Spa in Yorkville is suing 8 former employees who now work for a rival salon, Gliss.  The lawsuit claims the employees, “ruined” her salon by poaching clients through using personal information related to their hair dyes, as well as, having taken their contact information when they left her salon.

Typically, employees who leave for a competitor can solicit former employees and work for whom they please without any restrictions.  In doing so, they can use information that they have gained at their former employer, if that information is in the public domain or can be recalled by memory.  However, once the information is labeled as “confidential” it would no longer be acceptable to use it post-departure.  As well, if there is an employment contract, it must also be considered to determine whether the employee had agreed that they would not solicit clients or employees, make use of certain information or work for a competitor.

The Ontario Court of Appeal release a landmark case in the area in H.L. Staebler which found that employment contract clauses drafted in a manner that overreaches beyond that which is reasonable will not be enforced.  Non solicitation clauses will more often be enforced than non compete clauses and restrictions between 6 to 12 months will generally be within the range that a court would accept as reasonable.

Daniel Lublin is the Managing Partner of Whitten Lublin LLP, an boutique employment law firm, focusing on the law of dismissal.