Archive for the 'Employment Issues' Category

Update on Privacy Law

 

The Ontario Court of Appeal (Jones v. Tsige, 2012 ONCA 32) has recognized the tort of invasion of privacy or “intrusion upon seclusion,” acknowledging a right in Canada to sue when an individual’s privacy is intentionally invaded by another individual.  This case had to do with one bank employee accessing the bank records of another employee, without permission. Ultimately the claimant was awarded damages in the amount of $10,000 for breach of her privacy rights.

Read the full article here from the Field Privacy Group.

Calgary – 07:00 MST

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The Frontier of IP (Part 3)

 

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Who owns the IP rights to a Twitter account?  We associate such accounts with social media tools such as Facebook, which are deeply personal in nature. But is it really any different from any online account that you would use in the course of employment, such as a workplace subscription to a data library, or a collaboration tool such as Salesforce.com? An employer based in South Carolina puts their ex-employee’s Twitter account into this category, (Link to Article) claiming that when he left the job, the employee should have left behind the login, the Twitter account, and the account’s 17,000 followers.  In its lawsuit against the former employee (Update: Phonedog v. Kravitz – Amended Complaint), Phonedog has valued the account at $340,000 ($2.50 per follower per month).  

In Eagle v. Morgan the defendant employer claims that a former employee misappropriated (among other things) a LinkedIn account and its connections.

The law is not clear in this interesting area, which overlaps with IP law, employment law, and the law of trade secrets. One of the problems with a trade secrets claim is that Twitter followers and LinkedIn connections are not secret, and it’s questionable whether competitors could derive any value from knowing the information even if it was secret. Followers and connections are just that, they aren’t paying customers. US litigation should provide some clarity on these issues as this emerges more regularly. To date, there do not appear to be any Canadian cases that consider this point.

Related Reading: Who Owns Social Media Contacts: Employers or Employees?

Calgary – 07:00 MST

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Confidential Information and Ex-Employees

 

An employer shares confidential information with an employee. When the employee departs, what obligation does that ex-employee have with respect to the employer’s confidential info?

In part 3 of our 3-part employment law series, we look at an issue critical for many technology-based businesses: trade-secrets and confidentiality. Courts in Canada have made it clear that departing employees owe certain duties to their employer. Many of these duties expire when the employment relationship ends. Any attempt to bind the employee after employment must be limited by time and geography. Put another way, non-competition and non-solicitation obligations must be limited by time and space if they are to hold up; otherwise, courts will strike them down as being an unreasonable restraint on the employee’s ability to earn a living. However, those time-and-space limitations do not apply to wrongful disclosure of “truly confidential or proprietary information” by former employees. Simply put, employees cannot disclose their employer’s secrets. Those obligations continue until the information is no longer confidential or proprietary, or limitation periods have passed.  As the court stated in a recent Alberta decision, Evans v. The Sports Corporation, 2011 ABQB 244 (CanLII) (http://canlii.ca/t/fl0b3): “It is illogical to suggest that an employer must, to validly protect its confidences and proprietary information, specify a reasonable date after which a former employee is free to use the information for his own benefit and to the detriment of the former employer.”

Lessons for business: Check your employment agreements to verify that this is covered.

Related Reading: Executives Depart with Secrets and IP

Calgary – 07:00 MST    

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Are Non-Competition Restrictions Enforceable?

This is the second in our 3-part employment law series.

Employees are often asked to sign a set of “restrictive covenants” as part of their employment agreement. This is the case in many competitive industries, and particularly in technology companies. These clauses can include non-competition restrictions, non-solicitation obligations, and other restrictions which bind the employee after termination. In Globex Foreign Exchange Corporation v. Kelcher , 2011 ABCA 240, the Alberta Court of Appeal reviewed the enforeability of these clauses. This case provides guidance for drafting and imposing restrictive covenants. Here is a summary of some of the court’s most important findings:

  • Restrictive covenants can fail due to the “lack of consideration”. The employee has to receive something of real benefit in exchange for agreeing to be bound to the restriction. An employer who wants to impose a restrictive covenant in the middle of the employment relationship must take special care, since continued employment alone does not provide sufficient consideration for a new restriction to be imposed during the term of employment. This is because the employer is already required to continue the employment until there are grounds for dismissal or reasonable notice of termination is given.
  • Non-solicitation and non-competition covenants are not enforceable unless they are reasonable. What’s reasonable will depend upon the circumstances of the industry, the employer and the employee. For one of the ex-employees in this case, the court found that the restriction was unreasonably wide, because it prevented him from soliciting any customer for a period of 18 months. In other words, this restriction was not limited to customers with whom the ex-employee had a relationship during employment. The employer in this case had no legitimate interest in protecting this category of customers from solicitation by the ex-employee.
  • An employer remains free to dismiss an employee at any time provided there is just cause, or there is reasonable notice of termination, or payment in lieu of notice. If none of these occurs, then the employee has been wrongfully dismissed, and wrongful termination renders the restrictive covenants unenforceable. In other words, an employee who is not terminated for just cause, or given reasonable notice or payment in lieu cannot be held to the non-competition or non-solicitation restrictions that appear in the employment agreement.

Lessons for business? Review your restrictive covenants with experienced counsel. Carefully consider the process of introducing new employment terms in the middle of an employment relationship. And handle terminations very carefully to avoid the problems of wrongful dismissal.

Calgary – 07:00 MST

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Who Owns Social Media Contacts: Employers or Employees?

 

This post is the first in our 3-part employment law series.  Recent cases have again focused the spotlight on this vexing issue: when an employee leaves, do they take their social media contacts with them, or check them at the door?  Once upon a time, social media was something that employers asked you not to do while on the job. Now, Facebook, LinkedIn, Twitter, YouTube and Instagram feeds are not just idle time-burners, they might be part of your job description. In the UK case of Hays Specialist Recruitment (Holdings) Ltd. v. Ions, an employee was ordered to disclose his LinkedIn contacts when he left his employer, and a 2011 case in the US (PhoneDog v. Kravitz, 2011 WL 5415612 (N.D. Ca.; Nov. 8, 2011)) is grappling with this issue, where an employer claims $340,000 in damages from an ex-employee.  Lessons for business?

  • Check your own employment policies to see whether this is covered, and if not, consider introducing effective policies to manage social media issues;
  • Employees who are hired specifically for social media marketing are the obvious ones to look at, but salespeople, managers or executives should also be considered;
  • Theft of trade-secrets is often claimed, but commonly fails on the grounds that the social media contacts are often available for all to see.

Calgary – 07:00 MST

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Privacy in a workplace laptop?

 

In recent privacy decision from the Ontario Court of Appeal (R. v. Cole, 2011 ONCA 218), the court recognized a core right to privacy of personal information which extends into the workplace – in this case, an employer’s laptop that was used by the employee in the course of employment.  The question was whether the employee had a “reasonable expectation of privacy” in the contents of the laptop. The court decided that the circumstances of this case, the employee did enjoy privacy in the contents of the laptop.

 Calgary – 07:00 MDT

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Intellectual Property & Jail Time

 

Can intellectual property theft or infringement lead to jail time?

  • An employee can walk out the door with all kinds of interesting information. Customer lists, business methods, intellectual property of all descriptions. Last week a US jury convicted an ex-employee of Goldman Sachs of trade-secret violations arising out of his theft of software code.  Mr. Aleynikov, a computer programmer, violated the employer’s confidentiality policy when he purloined portions of the company’s code and then quit to join a rival firm. The algorithms in such code provides a critical edge in such a competitive industry as high-frequency stock trading. The charges flow from the Economic Espionage Act dealing with trade-secret protection, a US law that doesn’t have an exact equivalent in Canada. Mr. Aleyniko faces up to 10 years in prison when he is sentenced in March, 2011.
  • In Canada, we don’t have trade-secret protection legislation, and jail-time is extremely rare for white-collar theft of trade secrets or intellectual property. Under the criminal remedies section of the Copyright Act (Section 42), imprisonment is a possible punishment, but is rarely used in practice.  In R. v. Borg, [2007] O.J. No. 3287, a company was convicted of eight offences under the Copyright Act relating to importation and sale of forged copies of software.  The person who operated the company was convicted of two offences and the individual was sentenced to 60 days in jail.  However, that sentence was deleted on appeal.
  • In the recent case of R. v. Hirani (2010), 2010 BCPC 205 (B.C. Prov. Ct.), the Canadian Border Services Agency intercepted shipping containers which contained knock-offs of Chanel, Prada and Gucci bags. Undercover officers later attended at the store to which the goods were destined and nabbed the perpetrator.  The accused pled guilty and was fined $4,000, but avoided anything more serious. Jail time was technically part of the sentence, but was served in the community.

Related Reading:

Calgary – 08:00

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App Trade-Secrets Case Settles

 

The long-running battle between two of the app industry’s biggest players has settled: Zynga v Playdom (acquired in the summer by Disney). This lawsuit, in many ways, illustrates the battle for dominance in a highly competitive industry like app development, and included allegations against former employees of misappropriation of trade secrets, breach of contract, and breach of the duty of loyalty… even a threat of a jail time for one of the employees. For a more staid Canadian equivalent, see: RBC v. Merrill Lynch. That case dealt with bank employees, so it lacks the flair of social gaming, but is a good Canadian example of the duties of departing employees.

Related reading: Departing Employees & Trade Secrets

Calgary – 09:00 MST

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A Jolt for Privacy Law in Canada

The government has  introduced proposed amendments to the Personal Information Protection & Electronic Documents Act (PIPEDA). The changes to the federal law are wide-ranging and will have a significant impact on privacy law here in Canada. Here are a few highlights from a business perspective of the proposed changes in Bill C-29, and once it passes into law, we’ll provide an overview: 

  • Business Transactions: If you want to disclose personal information during negotiations for a “prospective business transaction”, the proposed changes under Section 7.1 will be of interest since they permit “…organizations that are parties to a prospective business transaction” to “use and disclose personal information without the knowledge or consent of the individual” as long as the organizations have entered into an agreement restricting use, and imposing “security safeguards appropriate to the sensitivity of the information”.  If the transaction does not proceed, then the information must be returned or destroyed.   This moves the federal law into line with the approach taken in Alberta.
  • “Business Contact Information” would be specifically excluded from the purview of PIPEDA. This category of personal information refers to an individual’s name, position name or title, work contact details and e-mail address.
  • “Employee personal information” will be treated differently under the new law, since the changes make it clear that consent is not required for the collection, use and disclosure of such information as long as it is to “establish, manage, or terminate the employment relationship” as long as the employer has notified the employee. This is best done at the outset of the employment relationship.  Again, this brings PIPEDA in line with the Alberta law.

Calgary – 09:00 MT 

 

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Trade Secrets: Zynga vs. Playdom

 

Earlier this year, iPhone app developer Zynga Game Network Inc. sued rival game-maker Playdom Inc. and a number of ex-employees in California state court. Among the causes of action were: misappropriation of trade secrets, breach of contract, breach of the duty of loyalty, tortious interference with contracts and unfair competition. Zynga alleges that Playdom hired away four key employees who allegedly took with them key information and planning documents when they left Zynga, including “The Zynga Playbook”, a document which would contain valuable trade secret information in the fiercely competitive app industry. The court granted an initial request for a temporary restraining order against Playdom and the other defendants. Those defendants are prohibited from destroying any of the files allegedly misappropriated. (To see the court documents, link here.)

Under Canadian law, the misappropriation of trade secrets has been scrutinized in several high-profile cases, including the RBC v. Merrill Lynch case, where virtually all of the investment advisors at an RBC branch joined competitor Merrill Lynch.  The law is clear that departing employees owe a duty of “good faith” to their employer, and can also owe a  “fiduciary” duty – a special category which applies to employees such as senior managers, executives, directors and officers.  In the RBC case, the departing employees were not fiduciaries, and had the legal right to leave RBC and to compete with their former employer. But note that employees owing a fiduciary duty will be held to a higher standard.

The lessons for business? Ensure your standard employment agreements contain appropriate non-competition and confidentiality clauses to prevent unfair competition and improper use of confidential information.
Calgary – 14:00 MST

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Executives Depart with Secrets and IP

 

Four key employees of a software company resign and start up a competing venture.  The former employer stumbles. The new company aggressively targets the customers of the former employer, and develops into a successful and profitable business, twice the size of the former employer.

On the surface, that’s the story of GasTOPS Ltd. and MxI, a story spanning 13 years, leading to an epic lawsuit (295 days of trial… that’s like going to trial 5 days a week every day for over a year). Last month, when the Ontario court handed down its 675-page decision, the former employees who left GasTOPS and started MxI were hit with an $11 million damage award, for usurping corporate opportunities, and misappropriating trade secrets, confidential information and intellectual property of the former employer.  The decision [3.7 MB PDF] covers the issues in great detail and if you can wade through the analysis, it’s a great survey of current case-law in this area.

The take-home message: departing executives owe a continuing fiduciary duty to their former employer, not to use confidential information or poach business opportunities. In this case, the judge said that duty should continue for 10 years after employment ends.

Related Reading: Departing Employees & Trade Secrets

Calgary – 11:45 MST

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Departing Employees & Trade Secrets

 

A recent survey shows that departing employees are leaving the office with more than the photos of their kids – they’re walking off with trade secrets and confidential company information. A majority of the survey respondents said they burned confidential information onto a CD or DVD, around 40% dragged it to a USB drive or e-mailed documents to themselves. 

In Canada, the Supreme Court of Canada recently weighed in on this area of law. In RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54 , virtually all of the investment advisors at an RBC branch walked out one day (without notice) and joined RBC’s competitor, Merrill Lynch.  RBC sued its departing employees and also sued Merrill Lynch and its manager.  The case went up through trial, to the BC Court of Appeal, and was appealed up to the Supreme Court of Canada.  The court decided that the departing employees owed a duty of “good faith” to RBC, but that none of them was a “fiduciary”  – a special category which applies to employees with a special relationship to the corporation, such as senior managers, executives, directors and officers.  In the absence of a non-competition clause or fiduciary relationship, the departing employees had the legal right to leave RBC and to compete with their former employer. However, the court was clear that a departing employee might be liable for specific wrongs, such as improper use of confidential information of the former employer. 

Watch for our seminar on this and other topics at our Events page.

 

Calgary 11:30 MST

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Privacy Decisions: Biometric Data

image001.jpgWhat do nursing homes and nightclubs have in common? In these 2 decisions, they both collect biometric data on their employees.

Biometric data can be anything that records “measurable characteristics” of an individual – from thumbprints to voice-prints to DNA. Organizations will collect and use this data with greater frequency as tracking technology becomes less costly and more reliable. So what do privacy laws say about this kind of information?

Two recent decisions from the Information & Privacy Commissioner of Alberta tackle biometric data collection issues head-on.

In Report of an investigation on the use of a hand recognition system, (August 7, 2008) the Commissioner investigated a nursing home in Calgary. The nursing home phased out employee swipe-cards, and introduced a hand-scanner as a way of tracking employee arrival and departure. The Commissioner decided that hand-scan data (measurements of a person’s hand to generate a unique identifier) does qualify as “personal information” under the Freedom of Information and Protection of Privacy Act (FOIPPA), and that the employer’s collection practices did not meet the requirements of that Act.

In Report of an Investigation into the Collection and Use of Personal Information, (August 27, 2008) the Commissioner looked into a complaint by an employee of an Edmonton nightclub, who was obliged to use a thumbprint sign-in system at the beginning of every shift. This time, the Commissioner made its analysis under the Personal Information Protection Act (PIPA) since the employer was a private sector organization. The employer did not collect thumb-prints but rather “unique numeric identifiers which represent distinct attributes of thumbprints” – a difference that should have been made clear to employees. This data qualified as “personal information” within the meaning of that Act, and in this case, by failing to explain its privacy policy, and thereby failing to obtain informed consent, the employer did not meet the requirements of PIPA.

The lessons for business? In both cases, the employers stumbled, but not on the type of data collected – the Commissioner accepted the employers’ argument that biometric data collection was reasonable and justified – but rather the employers both failed to adequately explain the collection process, answer questions and alleviate employee concerns. As the Commissioner stated: “Employers …have a heightened responsibility to be open and transparent about their practices as they relate to employees…”

Calgary – 10:00 MST

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