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3 Steps Businesses Should Take to Protect Confidential Information

on Monday, 24 June 2019.

Employment agencies and businesses frequently face issues relating to trusted employees joining competitors...

...often in breach of their restrictive covenants and taking confidential information with them. This article explores how to respond to such situations.

An Example

We recently advised a business where two employees had resigned from the same team, a month apart and in each case giving three months' written notice in accordance with their contracts of employment.

The first said they were leaving the sector to pursue other career opportunities. The second misled the employer by not disclosing their true intention. The upshot was that both employees, who held senior positions, were allowed to work their notice periods rather than being placed on garden leave.

The employer discovered their true intentions after the period of notice had been served. A substantial amount of confidential data had been taken, which included price sensitive information relating to the employer's services to its clients, as well as future trading plans and an IT development product.

The two employees were confronted with unequivocal evidence of their wrongdoing and threatened with injunctions and court proceedings. As a result:

  • They confirmed deletion of the employer's confidential information and that no such information remained in their possession.

  • They gave full disclosure as to all third parties including the new employer who had received confidential information.

  • The new employer was forced to suspend the two individuals.

  • The new employer agreed not to use the confidential information to offer similar services to the clients.

  • All of the parties involved in the wrongdoing have also had to indemnify the employer against any losses in the event that it is subjected to any investigation by the Information Commissioner's Office and subject to regulatory fines as a result of having to report considerable data breaches caused by its former employees.

What Does the Law Say?

There is a raft of legislation protecting the misuse of confidential data by employees and others, which includes:

  • the Copyright, Database Right and Infringement Regulations 1997

  • the Copyright Designs and Patents Act 1988

  • the GDPR Regulations 2018

  • the Data Protection Act 2018

  • various EC Directives

  • the common law

There is also an obligation on the part of an employee to act honestly towards his employer.

3 Practical Steps for Employers

Once confidential information in electronic data has left the protection of the employer's environment, it will be difficult for employers to limit further misuse and damage being caused.

Employers should therefore:

  • Make reasonable enquiries as to key employees' intentions when resigning.
    Consider whether or not to allow the individual to work their notice if commercial damage could be caused. However, remember not to breach the contract and put at risk any enforceable restrictive covenants.

  • Implement any data protection policy to ensure that the company's data has not been misused during any period of notice worked.

  • Review and remind departing staff of any relevant restrictive covenants that may be relevant and be prepared to enforce if necessary.

To discuss the steps to take to protect your business, please contact Michael Delaney in our Recruitment Law team on 01923 919 316, or complete the form below.

 

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