Protecting Confidential Business Information
Have you protected your confidential business information?
As an employer, how confident are you that your confidential business information is just that – confidential?
This post serves to provide a quick overview of the implied and express terms of a contract along with reference to breach of contract all in connection with confidential information.
What is deemed to be confidential information?
This really depends on your business, so to help you identify what confidential information may be related to your business we have provided some examples below:
- Client lists
- Financial information
- Sales prospects and leads
- Potential mergers and acquisitions
- Redundancy plans
- Price lists
- Internal processes
Implied and Express Terms
Within a contract of employment there is an implied duty of fidelity, meaning the employee will not act against the interests of the employer. As an employer you may decide that your business has specific confidential information which must be protected at all cost. You can protect it by using an express contractual clause.
It is essential that you don’t engage in a ‘one size fits all’ confidentiality clause within the employment contract. Ensure the details surrounding the confidential business information you want to protect is specific to the job holder. Consider what confidential information that person has access to and identify this clearly in the clause. Take time to review it regularly as technology and business practices change.
Remember that unless you have any post-employment restrictions in place, the employee is essentially free to use that information after leaving the business. Dependent on the seniority of the role or indeed the actual role itself, you may require additional safeguarding of your confidential information in the form of a restrictive covenant. Restrictive covenants bring their own considerations and are not the focus of this post, however have a read of a previous blog here.
If an employee breaches a confidentiality clause, what should you do?
Follow your own disciplinary procedures, a breach of confidentiality is likely to amount to act of gross misconduct which could potentially lead to dismissal. Your internal procedures need to be clear as to how this amounts to such an act, check your rules. Gross misconduct is an act that fundamentally undermines the relationship of trust and confidence between employee and employer. Employers can dismiss an employee without notice if found guilty of committing the act.
Employers can also seek damages for breach of contract, however, the employer must be able to evidence financial losses suffered as a result of the employee’s breach.
A recent High Court case, Marathon Asset Management LLP and another v Seddon and another  found that two employees were in breach of the implied duty of fidelity that they owed to the Company and the express contractual obligations contained within their contract. However, the High Court did not award the Company £15 million pound damages which it was seeking but instead awarded it nominal damages of £1 from each employee.