Use of Customer Information by Ex-employees
Employment & Labour Brief Winter 2006
The law appears to be well settled in British Columbia that non-fiduciary employees are free to compete with their former employer, and to make use of knowledge and experience acquired while so employed, so long as they do not disclose or make use of the former employer's confidential information, including customer lists removed from the former employer's premises. See, for example, Valley First Financial Services Ltd. v. Trach , a 2004 decision of the British Columbia Court of Appeal.
These decisions further indicate that a non-fiduciary employee may contact previous customers if he or she relies upon memory regarding the names and particulars of the previous customer.
While there are at least two cases which hold that the prohibition against an employee removing customer lists is not absolute (see, for example, TOS Insurance Services Ltd. v. Panahi), Axiom Services Ltd. v. Weigert et al. , a recent decision of the British Columbia Supreme Court, further limits this prohibition.
Weigert was a hairstylist who worked for the plaintiff Axiom with her co-defendant Pelletreau. Pelle¬treau began working for Axiom in 1995 and was one of its most popular stylists. During the period of her employment with Axiom, she had talked openly about her desire to work for herself and in 2001, she acted on this plan and opened her own salon. While Pelletreau did not acquire a printout of her clients prior to the time she left Axiom's employment, she did take with her an address book in which she had recorded telephone and address information for her regular clients. She used this address book to contact these clients when she began working at her new salon.
While the Court accepted the general proposition that non-fiduciary employees are prohibited from taking customer lists and information belonging to their former employer, it did not accede to the plaintiff's contention that, by keeping her own personal records, Pelletreau was essentially committing a theft of information. The Court held that, while in many employment situations, an employee would be clearly breaching his or her duty of loyalty to his or her employer by keeping track of customer information, the question of whether the conduct is improper is to be determined by looking at the purpose for recording the information.
The Court also held that unless Pelletreau's purpose for keeping the information was to benefit herself at the expense of Axiom, no breach of duty would be found. The Court noted that Pelletreau had not been directly asked whether or not her purpose in recording customer information was to take customers away from Axiom in the event that she left the salon. The Court found that there were other purposes (both personal and business) for keeping these records and declined to ascribe improper motives for compiling the data. The Court did state, however, that if Axiom had a clear policy against employees keeping contact information for clients, it might have been persuaded to draw an adverse inference against Pelletreau.
This decision is interesting on a number of fronts. It clearly departs from other authorities which hold that departing non-fiduciary employees can only rely upon their memories when contacting customers they dealt with during their prior employment. Weigert seems to say that an employee can use personally compiled records of customer information so long as the purpose for compiling those records is not for personal benefit. While it is our view that an employee who keeps records of customers must be doing so in furtherance of his or her employment duties, and that such records should be deemed to be the property of the employer, Weigert suggests that the prudent thing for an employer to do is ensure that policies are in place prohibiting employees from keeping personal records of customer information for any reason. In addition, the employer's policies, and employment agreements, should contain an express provision requiring all employees to return all copies of customer information upon termination of employment.
This article appeared in Employment & Labour Brief Winter 2006.