Question: Can an employee’s compensation information (salary and bonuses) be considered confidential company information that employees can be prohibited from disclosing?
Answer: At common law, an employee has an implied duty of good faith, which prevents the employee from disclosing or misusing the employer’s confidential information. Also, employment contracts often contain express provisions that are designed to protect the confidentiality of the employer’s trade secrets and other types of confidential information to which the employee could be exposed.
But what information is confidential? Do an employee’s confidentiality obligations extend to information about salaries or bonuses?
What about other types of remuneration, such as an employee’s benefits, car allowances, commission plans and retirement arrangements?
The answer to these questions will depend on the nature of the employer’s operation, and the express or implied terms of the applicable employment agreement.
In unionized workplaces, the terms and conditions of employment covering the bargaining unit employees will be set out in the collective agreement, which in most jurisdictions is a public document.
Similarly, the remuneration that is provided to managerial and other employees who work for the government or for public sector employers, will usually be publicly available and/or accessible under freedom of information legislation.
In some industries, however, information about salaries, bonuses and other aspects of compensation may be highly confidential. It may be very important for the maintenance of an employer’s competitive position, for example, to ensure wage and remuneration information does not fall into the hands of its competitors.
Also, an employer may not want its employees discussing their salaries and bonuses with co-workers.
If an employer wants to protect the confidentiality of its compensation information, it should not rely on its employees’ implied common law duties, as those obligations may fall short of granting the protection the employer requires.
In Fanucchi v. Price’s Alarm Systems Ltd., for example, the employee was dismissed less than a week after commencing employment after divulging her salary to another employee. At trial, the employer argued the employee had breached her duty of confidentiality.
The trial judge found the employee had not understood she was required to treat her salary as confidential, and ruled the employer had not established cause for dismissal.
The best way to ensure confidential information is properly protected is through a carefully drafted employment agreement.
The agreement should:
•contain a clear and comprehensive definition of confidential information
•set out the covenants the employee is required to comply with to preserve the confidentiality of that information
•describe the consequences of non-compliance.
If the penalty for disclosing confidential information is dismissal, that should be clearly spelled out. It may also be advisable to supplement the employment agreement with policies, communications and other notifications to emphasize the importance of maintaining the confidentiality of specific types of information.
Colin G.M. Gibson is a partner with Harris and Company in Vancouver. He can be reached at (604) 891-2212 or firstname.lastname@example.org.
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