How can my business protect confidential information?

Your business will have control over a huge amount of information. Depending on the importance and sensitivity of the information, the law provides protection for business against employees and former employees misusing this information.

The most sensitive and critical information held by a business can amount to a trade secret. It’s important to define in writing this as specifically as possible so your employees are aware of their obligations in relation to it.

Sensitive, non-public information relating to customer and supplier relationships and business plans is likely to amount to confidential information.

The know-how of employees and common knowledge used by employers is unlikely to be protected unless it can be elevated to the level of confidential information or a trade secret.

What if an employee misuses confidential information?

If an employee misuses confidential information, this can be treated as misconduct leading to disciplinary action. If the employee passes the confidential information to an external party, action can also be taken to prevent that third party from further misuse. If an ex-employee misuses confidential information, action can also be taken to prevent further misuse.

Courts have very wide powers to prevent misuse and can order wrongdoers to pay damages arising from the misuse, grant injunctions against future misuse and order legal costs to be paid by the guilty parties.

If you wish to seek orders preventing future misuse, you must act very quickly or you may lose the right to seek this important protection.

How can I protect intellectual property?

Employers should provide for an assignment of rights in all works created or developed by employees during the course of the employment in the employee’s contract of employment.

It’s prudent to clarify what this assignment covers, especially in relation to works that are created partially in the employee’s own time. This is particularly important in certain industries, such as the creative industry.

How do I ensure the return of property?

It’s important that any contract of employment or settlement agreement includes precise provisions which cover the return of all property belonging to the employer including physical property, intellectual property, electronic data (in whatever form it is held) and documents containing data, as well as software.

Such provisions should include the time-frame for the return of property, as well as obligations to erase any confidential information, software, or information which belongs to the business however held, including personal computers and mobile phones. It may be appropriate to include specific provisions which require a departing employee to confirm that all property and information has been returned or deleted.

Can I impose post-employment restrictions?

Employees will continue to have intimate knowledge of your business, strategy and commercial relationships even after their employment ends.

Although employees are subject to implied terms relating to confidential information, these may not cover specific risks that could arise upon their departure.

By including express post-termination restrictions in your contracts of employment, you can limit the potential damage to your business and deter your employees from joining competitors. These restrictions must be drafted carefully otherwise they risk being unenforceable.

If a term in a contract of employment restricts an employee’s activity after the termination of their employment, the default position is the term will be invalid as a restraint of trade. This will be the case unless the employer can show:

• That the business has a legitimate interest that it would be appropriate to protect; and
• The protection provided by the restriction goes no further than would be reasonable, considering the interests of the parties and the public interest

You must consider how reasonable the restriction is at the time that the contract is signed. Legitimate interests can include maintaining a stable workforce, preventing the leak of confidential information, and protecting good trade connections with clients, customers, and suppliers.

Post-termination restrictions, if drafted correctly, can legitimately prevent departing employees from:

• Joining a competing business
• Poaching clients or customers
• Dealing with your clients or customers
• Trying to poach, or employing your employees
• Interfering with your suppliers
• Moving with other team members

If a restriction is too broad, or too draconian, it will not be enforceable by a court. Therefore, it’s important to ensure that any post-termination restriction is appropriate for the employee subject to it.

In determining whether a restriction is enforceable, a court will consider:

• The role and seniority of the employee
• The length of the restrictions
• The activities that are subject to the restriction
• The geographical extent of the restriction

It’s therefore equally important that the restrictions are regularly reviewed for each employee as throughout the employment, the status or role of the employee is likely to evolve. The restrictions will not evolve with these changes and as such need to be reviewed and kept appropriate.

As with confidential information, the courts have very wide powers to enforce post termination restrictions, not only against the ex-employees, but also against third parties that participate in the breach of the restrictions e.g. a new employer.

The court can also order wrongdoers to pay damages for losses arising, legal fees and grant injunctions against further breaches of the restrictions. If you wish to seek orders preventing further breaches, you must act very quickly or you may lose the right to seek this important protection.

Protecting your business against internal and external threats is a crucial part of running a business particularly in this electronic world and it starts with getting the right documentation in place and regularly reviewing it.

For advice on how to protect your business, contact our expert employment lawyers today online or call 0330 041 5869 for assistance.