This article also appears in the Fall 2024 issue of COMMUNICATION A Publication of Pharmacists Manitoba Inc.
While most employees understand their professional obligations to an employer while employed by them, many are not aware that their legal obligations to their former employer may continue past the termination of that employment relationship. Such obligations often relate to confidentiality, privacy and solicitation of employees and customers.
In addition, it is important to be aware that there are also restrictions on sharing pricing information with a view to fixing the price of an item in the marketplace. This article sets out the ongoing nature of some of the duties and obligations that apply in the pharmacy setting.
Confidentiality
Employees are often entrusted with confidential information, such as customer lists, customer health information, financial information, supplier information and proprietary business information. The disclosure of this information to competitors, the general public or the use of it by employees, would be highly detrimental to an employer’s interests. Courts have acknowledged the interest that employers have in their confidential information. Generally, the Courts have found that all employees owe their employer a duty of confidentiality – both during and after their employment ends. This duty of confidentiality arises from a number of sources.
It is common for employers to include confidentiality provisions in employment agreements or have employees sign a confidentiality agreement. These provisions or agreements will typically define “confidential information” set out an employee’s obligations to the employer and may indicate that this duty is owed both during and after employment ends. A violation or breach of the confidentiality provisions or agreement may result in discipline, up to and including termination of employment. A violation of the provision or agreement post-employment may cause an employer to sue their former employee. This could result in damages awarded to the employer for loss of profit to the date of the trial and the value of future business, reputation and goodwill.
A duty of confidentiality may also arise from an employer’s policy. Employees are required to abide by the rules and policies put in place by their employer. The duty of confidentiality does not disappear if an employment agreement or policy is silent on the issue or a confidentiality agreement does not exist. An implied duty of confidentiality exists in all employment relationships.
All employees have a basic common law duty of good faith to their employers, which prohibits an employee from disclosing their employer’s trade secrets or confidential information (whether during or after their employment).
Fiduciary Duty
While the general duty of good faith is somewhat limited, an employee who is considered to be a fiduciary employee owes their employer a higher level of care – a fiduciary duty. Fiduciary employees have an obligation to act in their former employer’s best interests. In the case of post-employment obligations, this includes not disclosing or misusing confidential information in a way that negatively affects their former employer.
Not all employees will owe a fiduciary duty to a former employer. The Supreme Court of Canada has determined that a fiduciary duty will be owed by a former employee where: (a) the employee exercised some discretion or power; (b) the employee could unilaterally exercise that power or discretion to affect the employer’s legal or practical interests; and (c) the employer is peculiarly vulnerable to or at the mercy of the employee holding the discretion or power.
Although fiduciary duties are typically found to exist in “key” employees and senior management, there are examples where Courts have found lower level employees, including in a hairdresser in one case, to owe a fiduciary duty to their former employer.
Employers who accept and make use of misappropriated confidential information from a new employee are also at risk of a lawsuit from the former employer.
When it comes to personal health information, pharmacists, as employees employed in a highly regulated profession, have a further duty of confidentiality arising from both statute and the College of Pharmacists of Manitoba (the “College”). The Personal Health Information Act establishes rules that “trustees” must follow when collecting, using and disclosing an individual’s confidential personal health information. The College also requires members and employees to abide by the College’s Pledge of Confidentiality which safeguards an individual’s personal health information.
Where a pharmacist acts in breach of the professional confidentiality obligations, an employer may discipline an employee – up to and including termination of employment. Further, a member may be subject to disciplinary action from the College.
Restrictive Covenants
Restrictive covenants, such as non-competition or non-solicitation agreements, can create post-employment obligations that must be respected by former employees. Non-competition agreements prevent employees from working for a competitor or starting a competing business whereas non-solicitation agreements prohibit a former employee from soliciting (or recruiting) an employer’s employees, customers or suppliers.
Courts scrutinize non-competition agreements carefully. Courts will only enforce such an agreement where a former employer is able to show that the restriction is required to protect a legitimate proprietary interest in the business and where the length of time, geographical area covered and nature of the prohibited activities are reasonable. Courts are more willing to enforce non-solicitation agreements. Restrictive covenants are typically in force for anywhere from three to 24 months.
A breach of a restrictive covenant can form the basis for a breach of contract action against a former employee and, if successful, may result in an injunction against the former employee or the former employee paying damages.
Price Fixing
Employees should also be aware of the consequences of sharing or swapping pricing information with other businesses or employers, in the hopes of creating agreements for the pricing of goods. Price fixing – when two or more competing businesses agree to set the same prices for goods or services – is prohibited in Canada by the Competition Act and an agreement to fix prices is a criminal offence. The term “price” includes any discount, rebate, allowance, price concession or other advantage in relation to the supply of a product.
Penalties for engaging in price fixing include substantial fines. In the case of an individual, imprisonment for up to 14 years. In addition, persons who have suffered a loss or damage as a result of price fixing are also able to bring civil claims.
Conclusion
Not surprisingly, as regulated and trusted professionals, pharmacists have a series of obligations to maintain confidentiality and to handle personal health information properly. As changing employers becomes more common, employees should be aware of their duties to their employers, both during and after the termination of their employment and think of their legal obligations before they act.
Consequences for a breach of legal obligations range from discipline (including termination of employment) to a civil claim which may carry an award of damages to the employer. In addition, an individual or business who is found making illegal agreements on pricing and competition may also be subject to severe fines and/or imprisonment. Therefore, thinking before you act is always the best policy.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.