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Employee making unfair use of confidential information must pay share of damages
In April 1999, we reported Clayburn Industries Ltd. v. Piper, a case in which two employees recruited by a competitor were ordered, along with their new employer, to pay damages of $450,000 for using their former employer's confidential information (see "Manager, employee hit with damages for "unfair" use of confidential information" on our Publications page). Ultimately, the parties settled on a lesser amount, with Recor, the new employer, paying $245,000, and Piper, one of the employees, paying $60,000. No recovery was sought by Clayburn from Schoen, the other employee.
Following the settlement, Piper commenced an action against Recor to recover his portion of the damages. In a decision released on July 11, 2000, the British Columbia Supreme Court ruled against Piper's claim.
The right to be indemnified for damages, the Court ruled, "has traditionally been available to a person who, without active fault on his or her own part, has been required to pay damages that are rightly the primary responsibility of another party." The Court then expanded on the rationale for indemnification, and why it did not apply in this case:
"Where the precise act constituting the alleged misconduct is expressly authorized ... by the employer, there is an implied obligation on the part of the employer to indemnify an employee against the consequences of obedience to the employer's orders. ... However, that implied obligation does not extend to indemnification of an employee against the consequences of that employee's own misconduct.
... Even if it could be said that Recor urged Mr. Piper to adopt his actionable course of conduct, it cannot be said that Mr. Piper is not blameworthy or without personal fault in respect of the breach of his employment contract with the plaintiffs. Clearly, Mr. Piper actively and aggressively breached his contract with the plaintiffs. He used confidential information he had obtained as an employee of the plaintiffs to his own economic advantage."
Therefore, as Piper had not been blameless in the matter, he was not in a position to demand indemnification from Recor.
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