Protecting confidential business information is a crucial issue for employers. Generally, contracts of employment specify in writing that employees must protect confidential information and trade secrets and not disclose this to third parties or use such information for their own benefit. It is also usually specified that this duty applies both during employment and beyond the termination of employment.
Even if there is no specific contractual clause, there can be an implied term that employees will not use or disclose confidential information, although it is far better to have these duties set out in writing as part of the employment relationship.
If an ex-employee breaches such duties, an employer can take various steps to protect the confidential information and prevent further breaches. The employer can consider the following options:
1. Seeking undertakings from the former employee that they will not use or disclose the confidential information;
2. Obtaining injunctions; and
3. Seeking damages for financial loss.
Steps 2 and 3 obviously involve the civil courts and as a result, they can be costly to undertake as well as running the risk of being required to pay the other party’s costs.
In the case of Arthur J. Gallagher (UK) Ltd and others v Skriptchenko and others (2016) the High Court granted an injunction with an order for the inspection of electronic devices and computers belonging to ex-employees and their new employer, and also for the destruction of any confidential information belonging to the old employer found on those devices. The case is particularly interesting because it included destruction of information found, which is rarely granted by the High Court.
In the case, a former employee had taken a list of 300 clients from his employer when he left his employment, and then disclosed this to his new employer. The information was used by the new employer to approach those clients with the view of obtaining their business. There was evidence that senior staff at the company knew they were breaching confidentiality, and it was admitted as such. The High Court were mindful of that, and therefore felt justified in ordering for destruction of the information found to ensure that the confidential information could not be misused again. However, the High Court made a concession that the imaging of documents would be preserved so that if it was subsequently found that the material had been wrongly removed, it could be restored.
The case perhaps shows that the courts are better informed about such matters than some people believe, and understand that the traditional injunction which orders inspection only may need to go further and include destruction of any information found to ensure that future breaches do not occur. Many employers have been frustrated that inspection of devices only never quite hit the mark, and still did not stop the breaching party sitting quietly for a bit and then using the information all over again. However, this case had some clarity in that the breaching party admitted being aware they were misusing the confidential information and there was evidence supporting this.
In our experience, specific clauses in an employment contract are a necessity – firstly, to highlight to an employee that they have duties not to misuse confidential information, and secondly, to add weight to any proceedings if an employer has to take action.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).
Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.