This is the third of a series of monthly legal articles by law firm Hegarty Solicitors, with offices in Oakham, Stamford and Peterborough. Established in 1974, Hegarty Solicitors offers expertise across a wide range of legal services and the company's experienced and accomplished team of solicitors and legal advisors can put you, your business and your family in a strong position for the future.

Irreparable damage can be done to a business whose trade secrets are leaked to a competitor. The ability of employers to protect their confidential information and obtain redress if it is leaked or misused is vitally important.

Employment law expert Martin Bloom at Hegarty Solicitors discusses the duties of confidentiality owed by staff both during and after their employment and the remedies available to employers whose employees breach these duties.

What classifies as confidential information?

There is no statutory definition for what is classified as 'confidential information'. According to Case Law, for a piece of information to be considered confidential it must have 'the necessary quality of confidence about it'. This means it must not be public knowledge, useless information or trivia.

In order to be protectable, the information must be inherently confidential – it must also have been imparted in circumstances importing an obligation of confidence.

The Duty of Confidentiality

All employment contracts contain an implied term that employees will conduct themselves with fidelity and good faith and this is commonly referred to as 'the duty of confidentiality'.

This implied duty includes an obligation not to disclose to third parties the employer's confidential information and trade secrets obtained during the course of and as a result of employment.

Breach of Confidence

It will be a breach of confidence for an employee, whilst still employed, to disclose or use for their own purposes information which is part of their skill and knowledge acquired in the course of their employment – unless that skill or knowledge is generally available such that it does not fall within the definition of being 'confidential'.

A classic example would be if the employee made or copied lists of customers for their own use after the employment relationship ends or they deliberately memorise such a list.

If the employer finds out that the employee has taken confidential information whilst still employed that may constitute grounds for dismissal e.g. for committing an offence of gross misconduct, the employer should still follow a fair disciplinary process.

Trade Secrets

The Court of Appeal defined a trade secret as 'secret processes of manufacture such as chemical formulae or designs or special methods of construction or other information which is if a sufficiently high degree of confidentiality as to amount to a trade secret'.

After the employment relationship has ended, information which is confidential but falls short of being 'trade secret' ceases to be protected.

Settlement Agreements

There is no implied duty requiring an employee to surrender confidential information to their employer at the time their employment ends unless this is expressed the contract. In the absence of such a term, employers usually make reference to it within a Settlement Agreement.

The employer may impose a non-competition covenant on an employee during the course of their employment or even setting one out within the terms of a Settlement Agreement.

When does a skill or knowledge amount to confidential information?

Express post-employment covenants cannot be used to prevent an ex-employee from using their own skills and knowledge as this would have the effect of prohibiting competition.

This involves delicate and complex issues from determining what amounts to skill and knowledge as opposed to the use of confidential information.

Employers must also be aware that if they terminate the employee's employment in breach of contract (e.g. by failing to make a payment in lieu of notice or unfairly dismissing the employee) any post-termination restrictions will not be enforceable. This fact stresses the importance of incorporating such terms into any Settlement Agreement.

When may Court action be required?

The courts are more likely to protect an employer if the employee has deliberately taken such information. This can include downloading and emailing to their personal address confidential information or accessing and removing it by some other means.

In the event of a breach or suspected breach of confidentiality, the employer will need to seek an injunction against the ex-employee and/or a third party such as the ex-employee's new employer.

In addition to an injunction (or sometimes as an alternative), the employer may seek damages i.e. compensation to recover the loss suffered as a result of a breach of confidentiality. The aim of such a claim is to put the employer in the position they would have been in had the breach not occurred.

It is, of course, better to prevent the employee from removing the information in the first place!

To speak to Martin Bloom about any aspect of Employment Law, please call 01733 295632 or email [email protected]

Martin joined Hegarty Solicitors in 1979, where he qualified in 1981, and has been a partner since 1983. Martin was appointed as an Employment Judge in 1995 and presently sits in the South East region based at the Cambridge Employment Tribunal. His extensive experience means he can provide in-depth advice in all areas of employment law including employment contracts, consultancy agreements, unfair dismissal and discrimination claims as well as representation at Employment Tribunals. Martin is a member of the Industrial Law Society and the Employment Lawyers Association.