Despite extensive litigation in the area, it is still common practice for employees moving between companies (particularly competing firms) to bring with them confidential information belonging to their former employer. All employees have a duty of confidentiality imposed by common law and these duties are often expanded or clarified in their employment contract or company handbook. Such contractual provisions can be useful if they are properly used to specify areas that are genuinely confidential. However, these contracts can fall into the trap of attempting to define too much information as ‘confidential’ and the courts are likely to view excessively inclusive clauses with scepticism. This article discusses the issues for new and former employers when an employee leaks confidential information.
Former employers
Prevention is better than cure, so the most effective tactic is to prevent confidential information from ever leaving the company’s premises. Business needs such as electronic communications and remote working, however, make this approach impractical. Employers can put in place technological measures that limit employees’ opportunities to abuse access to confidential information. IT systems, for example, can be configured to prevent information from being downloaded from the company’s system, or keep an easily accessible record of when sensitive information has been downloaded or printed out. If an employer has reason to believe that an employee is engaged in the removal, or potential removal, of confidential information, this may give it legitimate grounds to examine the employee’s access to computer systems. Employers should review all e-mail and internet activity, and review system access to see if there has been any suspicious downloading of information. If there is evidence of wrongdoing, then an employer could also perform a search of an employee’s desk drawers, locker and briefcase to ensure that there are no hard copies of the documentation ready for removal. While the abuse of confidential information is clearly a disciplinary offence for which the employee may be dismissed, such action does little to protect an employer’s business if the employee has already obtained the information. If necessary, employers can take appropriate legal action to force an outgoing employee to return or destroy confidential material and ensure that the information is not misused. Employers are also able to seek an interim injunction prohibiting any misuse of confidential information, pending a full trial on the matter. Injunctive proceedings are expensive and time consuming, and the key practical point is that any proceedings must be issued as soon as possible, as any delay in the process may mean that a court will decline to issue the injunction, even when presented with a clear breach. Employers will still be able to make a claim for breach of contract but such a move is usually of little value in breach of confidence cases.
New Employers
Where a new employee has brought confidential information to a company without its knowledge, the new employer has no liability to the former employer and the information should simply be deleted or returned, as appropriate. Conversely, a new employer is directly liable to a former employer in circumstances in which the new employer has ‘induced’ the employee to breach their duty of confidentiality. For a claim to succeed, a former employer will be required to show that a new employer:
- caused the breach of an employee’s duty of confidentiality;
- was aware that the action would amount to a breach of legal obligations; and
- intended to inflict harm on the former employer.
Former employers will also need to show economic loss resulting from the breach of contract. This is because inducement of a breach of contract is a claim in tort and any damages will be calculated on the basis of the financial position that the former employer would have been in if the inducement had not taken place. Where an employee acts independently to breach a contract, then the new employer has no direct liability. To minimise the risk of liability, it should be made clear to new employees, preferably in the offer letter, or employment contract, that they are required to abide by all legal obligations to their former employer.
By Greg Campbell, partner, andLaura Ford, solicitor, Mishcon de Reya.E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; This e-mail address is being protected from spambots. You need JavaScript enabled to view it .