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Protect your company's confidential information

13 July 2012

When employees join the competition there's the possibility they will take more than their own skills with them. Emilie Bennetts explains how to protect your company's confidential information

The Problem
I have found out that a senior ex-employee, who had access to very sensitive information about my business, has joined my main competitor. I am concerned that this employee may disclose confidential information about my business, such as the marketing and financial plans that he helped to prepare when he was employed by me. What can I do about this and to prevent this from happening in the future?

The Law
During their employment, an employee is under an implied legal duty not to misuse or reveal any confidential information about an employer's business, apart from as necessary to carry out their duties. This implied duty also applies to ex-employees, but to a lesser extent.

As it is also generally easier to enforce a claim for breach of contract, it is therefore recommended to include an express confidentiality clause in all employment contracts. In order to be protected, the information must be confidential in nature; therefore, it must not be public property or already in the public domain.

Any confidentiality clause should be carefully drafted with regard to the employee's role and the nature of the information that they are likely to have access to. Any specific examples of information the employer regards as confidential (for example, customer lists, menus or recipes, business plans or financial information) should be included.

If an employee or ex-employee breaches their duty of confidentiality, either by disclosing confidential information to others (such as a new employer) or by using the information for an unauthorised purpose, and this results in loss to the business, an employer can bring a claim against the individual for damages (financial compensation for the loss caused).

The courts can also issue injunctions in particular cases, to prevent the individual from disclosing or using certain information. Injunctions are of little or no use once the information has already been disclosed or used, but they are often the first choice of legal action if the employer (the disclosing party) discovers the recipient's intentions before the breach of confidentiality has taken place.

Expert Advice
To protect confidential information, business owners should ensure that employees are informed of their duty in respect of confidential information, and that confidential information is only disclosed to them where strictly necessary. Ensure that well-drafted confidentiality clauses are included in all employment contracts and all freelance/contractor agreements.

When considering disclosing confidential information to a third party (such as in the context of a commercial negotiation), ensure that express confidentiality agreements are entered into.

Checklist

â- Ensure that access to confidential information is restricted; for example, consider restricting access to areas of the company where confidential processes are conducted, or where new recipes are developed.

â- Ensure you mark any confidential documents or processes as confidential.

â- If you suspect that an individual may be about to disclose confidential information, act quickly and take legal advice.

â- Give employees practical guidance about keeping information confidential - for example, taking care when using blackberries or laptops on public transport, or not discussing company business in public places.

â- If a project is particularly sensitive, limit those individuals who will be working on it and ask them to enter into a specifically tailored confidentiality agreement for that project.

â- Remind departing employees and consultants of their obligations of confidentiality and ask them to confirm in writing that they have returned all company property (such as documents).

Beware
Once confidential information has been disclosed, it can already be too late to prevent significant damage from being done to a business. The best protection is therefore to ensure that those working for your business know what is expected of them regarding confidentiality, to limit access to confidential information, and to ensure that appropriate contractual restrictions are in place.

Contact
Emilie Bennetts is a solicitor at Charles Russell LLPemilie.bennetts@charlesrussell.co.uk

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Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

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