In Boaden Catering Limited v Earl Haig Community Day Care, the Ontario Superior Court of Justice (“ONSC”) dismissed an employer’s claim that its former employee misused confidential information and engaged in unfair competition after leaving the company. This decision offers key insights for employers on how to handle disputes and craft enforceable restrictive covenants.

Background

The former employee worked as an executive chef at Boaden Catering Limited (“Boaden”), which provided catering services to Earl Haig Community Day Care (“Earl Haig”). After leaving Boaden, the employee joined Earl Haig as an on-site chef, and Earl Haig stopped purchasing catering services from Boaden.

Boaden’s employment agreement with the employee included restrictive covenants—confidentiality, non-competition, and non-solicitation clauses. These clauses prohibited the employee from disclosing confidential information for personal gain, competing with Boaden, or soliciting its clients within a 100-mile radius for 24 months after leaving the company.

Following the employee’s departure to Earl Haig, Boaden filed a lawsuit, claiming the employee had misused its confidential information and unfairly competed with it by sharing that information with Earl Haig.

ONSC Decision

Confidentiality

The ONSC dismissed Boaden’s claim that the employee had breached confidentiality, emphasizing that for information to be considered “confidential”, it must be both secret and specific to the employer. In this case, Boaden’s menus were neither designated nor treated as confidential. Boaden delivered its menus to over two-hundred daycare clients on a weekly or monthly basis, and it did not require its clients to keep its menus confidential. In fact, some clients posted the menus in their kitchen or on bulletin boards, and nothing prohibited these clients from sharing the menus with parents. Boaden also shared a sample menu online.

As the employee was Boaden’s executive chef for seven years, he also would have acquired general knowledge of Boaden’s processes and recipes, which are not protected as confidential.

Additionally, the ONSC noted that Boaden failed to present evidence of any confidential pricing information. Without clear proof, the ONSC could not find that the employee had misappropriated confidential information.

The ONSC further noted that, in the alternative, even if some information had been deemed confidential, the employee only reused the menu template to save a few hours of drafting—not to directly compete with Boaden.

Breach of Contract

Regarding Boaden’s claim of breach of contract, the ONSC noted a plaintiff must show that a monetary award would restore it to the position it would have been but for the breach. Although Boaden did not clarify whether the employee’s conduct entitled it to a monetary award based on misuse of confidential information or unfair competition, the ONSC found that in any event, the employer did not demonstrate the employee’s actions led to any profit loss.

Non-Competition and Non-Solicitation

The ONSC found that the non-competition and non-solicitation clauses in the employment agreement were unenforceable. The non-competition clause was too broad, with a geographical restriction of 100 miles, which was excessive given Boaden’s primary operations in the Greater Toronto Area. The ONSC also found the term “unit or regional office” to be unclear.

The non-solicitation clause was invalid due to vague geographic coverage and an overly long restriction period. Furthermore, Earl Haig was not considered a direct competitor of Boaden, as it is a daycare, not a catering company.

Key Takeaways for Employers

This case underscores the need for employers to approach legal disputes with caution and to ensure their restrictive covenants are clearly drafted and enforceable. Employers should keep the following in mind:

Think Twice Before Suing: Before pursuing legal action for misuse of confidential information or breach of contract, employers should carefully assess whether they have actually suffered financial harm. If no tangible loss is evident, the costs of litigation may outweigh any potential benefits.

Take Proactive Steps: When hiring new employees from a competitor or client, employers should verify whether the employees are bound by restrictive covenants in their previous employment agreements. Employers should consider including an employment term that confirms the new employee is not in breach of any restrictive covenants by working for their business.

Draft Strong and Clear Restrictive Covenants: To prevent having their restrictive covenants deemed unenforceable, employers should ensure these clauses are specific and clear. Employers should define geographical areas, prohibited activities, and the duration of restrictions precisely. Employers should avoid overly broad or vague language, which can lead to unenforceability, as was seen in this case.

By taking these steps, employers can better protect their business interests and minimize costly legal disputes.

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.