Confidentiality clauses are a critical component of employment agreements, particularly for senior employees with access to sensitive business information. A recent decision from the Ontario Superior Court of Justice underscores both the importance of well-drafted confidentiality obligations and the strict pleading requirements employers must meet when alleging a breach.
In Contino v. Olymel L.P., the Ontario Superior Court of Justise examined whether an employer had adequately pleaded a claim for breach of confidentiality after a senior executive allegedly downloaded hundreds of internal documents before leaving to join a competitor. While the Court accepted that enforceable confidentiality obligations existed, and were breached, the employer’s claim ultimately failed due to a lack of specificity.
The case offers important guidance for employers and employees alike on what confidentiality clauses must contain and what evidence is required to enforce them.
The Case: Confidential Information Taken by a Senior Executive
In this case, a senior executive resigned from his position and joined a competitor. Prior to his departure, he downloaded several hundred internal files. These files allegedly included:
- Key business information including transactions
- Business projections
- Customer lists
- Business strategic plans
The employee sued for wrongful dismissal. The employer counterclaimed for:
- Breach of contract
- breach of confidence
- Copyright infringement.
Olymel relied on multiple documents to support its claim including:
- Employment agreement
- A non-disclosure agreement
- Code of Conduct.
What the Court Accepted: Enforceable Confidentiality Obligations
The Court found that the employer had adequately pleaded the existence and scope of confidentiality obligations and held that they were in fact breached.
In reviewing the Counterclaim, the court found there were many paragraphs identifying the terms of the contract, Non-Disclosure Agreement and Code of Conduct that were breached:
• Para. 12: (2.1) keep the confidential information secret; (2.2) refrain from using the confidential information for an unauthorized purpose without prior written approval; (2.3) only disclose confidential information to officers, employees and representatives on a need-to-know basis.
• Para. 14: no confidential information may be disclosed to any unauthorized person without prior written permission.
• Para. 14: upon departure an employee must return all documents.
• Para. 20: following termination the Plaintiff did not return the stolen property.
The Court confirmed that, read as a whole, the contractual documents clearly prohibited the misappropriation and dissemination of confidential information and imposed enforceable post-employment obligations.
The court stated at paragraph 27:
In my view, Olymel’s Defence read as a whole contends that the contract documents prohibited the Plaintiff from misappropriating and disseminating confidential information and imposed an obligation to return all documents upon departure. On a broad reading, the terms alleged to have been breached are set out with sufficient clarity.
Where the Claim Failed: Lack of Specificity
Despite finding the enforceable obligations existed and were breached, the Court took issue with the last element in establishing a breach of contract. The court struck Olymel’s counterclaim in its entirety because the company was not “specific enough in describing what confidential information was misused, and exactly what financial consequences it had suffered as a result.” In particular, the court underscored that Olymel:
- only broadly referred to 466 files was insufficient
- grouping documents into general, broad categories such as “business strategies”, “price lists” and “deals” was too vague and general
- The employer did not specifically identify which documents held confidential information
- The employer failed to clearly plead the financial harm allegedly suffered
This failure did not meet the minimum level of factual disclosure required by Ontario’s Rules of Civil Procedure.
Key Takeaway: Confidentiality Clauses Are Only as Strong as Their Enforcement
This case highlights an important reality:
Even where confidentiality clauses are enforceable, employers must plead and prove their case with precision.
To successfully claim a breach of confidentiality, an employer must:
- Clearly define confidential information
- Plead how the information was misused
- Set out specific damages that resulted from breach
Without this level of detail, even strong contractual protections may fail.
Checklist for Employers: Drafting and Enforcing Confidentiality Clauses
- Clearly Define Confidential Information
- Specify exactly what constitutes confidential information (documents, emails, business strategies, customer lists, financial projections).
- Avoid vague categories like “business strategies” without examples.
- Set Out Employee Obligations
- Include duties to keep information secret, limit disclosure to need-to-know persons, and prohibit unauthorized use.
- Specify post-employment obligations, such as returning all materials.
- Incorporate Multiple Supporting Documents
- Use employment agreements, non-disclosure agreements, and Codes of Conduct in tandem.
- Ensure terms are consistent across documents.
- Include Remedies and Consequences
- Outline potential legal remedies for breach.
- Clarify consequences for misuse, including termination, injunctions, or damages claims.
- Maintain Detailed Records
- Keep records of who accessed confidential information and when.
- Document any departures and ensure return of company property.
- Be Specific When Pleading a Breach
- Identify the exact files or data allegedly misused.
- Quantify or describe the harm or financial loss suffered.
- Avoid general references to broad categories of information.
- Review Regularly
- Update confidentiality clauses periodically to reflect evolving business practices and legal standards.
- Provide employees with periodic reminders about their obligations.
Frequently Asked Questions About Confidentiality Clauses
Are confidentiality clauses in employment agreements enforceable in Ontario?
Yes. Confidentiality clauses are generally enforceable, particularly where they are clear, reasonable, and connected to legitimate business interests such as protecting sensitive or proprietary information.
What must an employer prove to establish a breach of confidentiality?
An employer must identify the specific confidential information taken or misused, demonstrate that it was protected under the agreement, and plead the actual harm or damages suffered because of the breach.
Is it enough to say an employee took “confidential business information”?
No. Ontario courts require specificity. Broad categories like “business strategies” or “internal documents” are typically insufficient without identifying the actual documents and their confidential nature.
What should employees know before leaving for a competitor?
Employees should review their employment agreement, non-disclosure obligations, and company policies carefully. Taking or using confidential information after departure can expose employees to significant legal liability.
Get Legal Advice on Confidentiality Clauses
Whether drafting confidentiality provisions, enforcing post-employment obligations or defending against an alleged breach, experienced employment legal advice is essential. If you have questions regarding drafting or enforcing confidentiality clauses, speaking with an experienced employment lawyer can help you understand your rights and legal options.
Whitten & Lublin regularly advise employers and employees on confidentiality obligations, restrictive covenants, and employment contract disputes. Contact us online or by phone at (416) 640 2667.
Author – Sophie Teversham
