Constricting Confidentiality Clause

Can a witness summoned by a regulator decline to answer questions because they owe a duty of confidentiality to their employer? In the Matter of B, 2020 ONSC 7563 (CanLII), the Court said no. Unless a specific question raises a compelling confidentiality obligation that outweighs a regulator’s right to obtain information to protect the public, the witness must answer the question.

In the Matter of B, an employee of a company under investigation by the securities regulator was summoned by the investigator. The employee refused to answer any questions about the matter on the basis that their employment contract prevented the disclosure of any matters related to the employer. The Court held that such a provision must be interpreted as being subject to a legal requirement to provide information to the regulator. The Court said:

Likewise, while an employer can expect that an employee will adhere to its contractual obligations to maintain confidentiality, it cannot possibly expect that the employee will maintain that confidentiality in the face of a summons issued by the OSC pursuant to its statutory powers under s. 13 of the Act. To hold otherwise would encourage an employer to deliberately exclude the language “except for disclosure required by law” from the confidentiality provisions in an employment agreement, in order to insulate the employer from investigation by securities regulators. I cannot accept that position.

The Court did allow for case-by-case exceptions where a privilege claim might attach to the information. However, the Court suggested that such exceptions would be rare.

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