Injunction set aside against former employees due to weak evidence of their obligations

In GG & HH Inc. v 2306084 Alberta Ltd., 2022 ABQB 58, a judge set aside an injunction to enforce restrictive covenants against three former employees at a pharmacy.   GG & HH Inc. (“GG & HH”) operated several pharmacies in Calgary and brought a claim against three former employees alleging that they breached their duties of good faith and fidelity by operating a competing pharmacy during their employment and using confidential information from GG & CC to solicit customers/patients.

Between 2017 and October 2020 three former employees (2 pharmacists and 1 pharmacy assistant) left GG & HH and eventually opened up new pharmacies in the surrounding area. One of the pharmacies was across the street from the flagship store of GG & HH. GG &HH alleged that the former employees used confidential information from GG & HH to carry out the solicitation of their patients.  

In June 2021, GG & HH obtained an interim injunction against the three pharmacists that prevented the former employees from using, reproducing, copying or disclosing patient information known to be GG & HH’s former or current patients and from soliciting these patients.  In 2022, GG & HH sought to extend the interim injunction.  At the time of the initial interim injunction there was little evidence but it was alleged that the employees had signed a written undertaking of confidentiality.

The new application to extend the interim injunction was contested by the former employees who argued the interim injunction should be set aside. They disputed they had signed a written undertaking of confidentiality and provided detailed evidence as to the relationship with the previous pharmacy and the new pharmacy.  

The court reviewed the test for granting an interim injunction. The test required GG & HH to demonstrate, (1) there is a serious question to be tried (2) that it will suffer irreparable harm without an injunction, and (3) that the balance of convenience favors granting the injunction.

In considering the evidence, the court held that GG & HH did not demonstrate that there was a serious issue to be tried with respect to a number of allegations including that the employees were in breach of any fiduciary obligations. The court also did not find irreparable harm by the employee’s conduct.  Lastly, the court explained that even if GG & HH were able to demonstrate a serious issue and irreparable harm, they would not be successful in demonstrating the third part of the test. The court held the balance of convenience would favor the employees.  The court held the evidence in support of GG & HH’s position was weak.  The court also found it was in the public interest to prefer open access to health services as well. This case highlights the importance of including confidentiality and non-solicitation obligations in your employment contracts if you want to be able to enforce those after an employee leaves.   These types of clauses can be difficult to enforce in some circumstances, and legal counsel should be consulted to draft such clauses. 

Looking for more information? Contact Brett Weninger at [email protected] or anyone else listed on our authors page.