Insights

Protecting Confidential Information from Ex-Employees

Written by Martin Pratt
10/12/2013

A survey earlier this year by the US global information security firm Symantec suggested that a staggering 70% of former employees surveyed in the US, UK, France, Brazil, China and Korea who had recently left their jobs, would consider taking confidential data with them, and 62% saw nothing wrong in this practice.

The threat posed by ex-employees can hardly have been greater at any point in history. Today, anyone can easily download a colossal amount of data onto portable devices such as smart phones and MP3 players, simply by plugging them into a PC. But too many employers do not take the threat seriously and fail to take the most basic legal and technical steps to protect themselves. As a result, massive commercial damage is caused by leavers taking sensitive data, like client lists, pricing structures and technical information, home with their P45.

The law can assist employers who help themselves though. Back in the early 1980s, a Northamptonshire chicken salesman called Mr Fowler fell out with his employers, Faccenda Chicken, and set up a competing business using his contacts gleaned working at Faccenda, as well as knowledge of their requirements and prices they were willing to pay. Unsurprisingly, Faccenda Chicken was none too pleased. The resulting case, Faccenda Chicken v. Fowler, set the ground rules for how and when employers can prevent ex-employees using their confidential information.

While an employee remains employed, he or she is under a strict duty not to disclose the employer’s confidential information. It is a breach of contract and very likely gross misconduct if they do. But for most employees, and most types of information, after the end of employment all bets are off.

Only rare types of highly confidential information (which the court described as “trade secrets” – like the Coca Cola formula) continue to be protected in the absence of express agreement. Other information will not be protected unless the employer has taken steps to protect it. The employee’s own know-how and skills can never be protected but other types of information can.

If employers have information they want to protect then they must expressly identify what that information is and limit its dissemination. For example, if the client lists of a business are confidential and there is a restriction in the employment contract saying so then the employee is not permitted to copy (or memorise) the lists to use post-termination of employment.

Employers can use those written post-termination duties to ask a court to grant an injunction stopping the employee using the information, obtain damages or even grant an order for delivery up of documents or files. However, no order can be granted by the court without actual evidence of disclosure and damage to the business and, vitally, without that express, tightly drafted confidentiality clause in the employment contract. Employers without that protection are at risk from the 70% who would happily waltz away with their most precious information.

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Martin Pratt

I am a partner in the employment law team and represent both individuals and employers, but specialise in acting for professionals such as public company directors, lawyers, hedge fund managers, accountants, MDs in investments banks, private equity principals and tech entrepreneurs, both as individuals leaving old employers and setting up or joining new enterprises. I advise senior individuals on new employment contracts and joining LLPs. On the employer side my expertise covers the employment aspects of mergers, acquisitions and outsourcing. My varied employer client base includes professional services firms, hedge funds, publishers, marketing agencies, charities, fitness studios and medical practices. I represent clients in all types of employment related disputes, involving matters like whistleblowing, discrimination, bonus claims, harassment, TUPE, High Court injunctions and unfair dismissal.  

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