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Introduction to protecting your business information
Most businesses have information that is critical to their success and therefore of great value to a competitor or a departing employee who plans to set up a business in competition.
The four main types of business information (listed in order of protectability) are:
- Trade secrets
- Confidential information
- Information that amounts to skill and knowledge of an employee
- Public information
With company data increasingly portable via mobile devices such as laptops and smart phones, it is more important than ever that businesses take steps physically to safeguard their confidential information, but such protection will be inadequate without effective ways to stop the unauthorised use of business information by ex-employees.
How can I protect my business information?
The clearest way to protect your business information is through your employees’ contracts. We recommend you include express terms of confidentiality in the employment contracts of workers who have access to confidential business information.
Employers should consider ways to warn employees that certain information is to be treated as confidential and commercially sensitive. In addition to including a relevant clause in their employment contract, a business may decide to mark sensitive documents with a confidentiality stamp, print confidential information on different-coloured paper or simply mark documents as private and confidential and circulate them in sealed envelopes. The fact that an employer has taken such steps can be a point in its favour if a confidentiality dispute reaches court.
There is a term implied by law into all employment relationships that employees will conduct themselves with ‘good faith and fidelity’. This means they are obliged to:
- Act honestly towards their employer.
- Disclose to their employer all information relevant to its business.
- Not make secret profits from their employer’s business.
- Not compete with their employer’s business.
After employment has ended the only type of business information that can be protected by this implied duty of confidentiality (i.e. without an express contract clause) is trade secrets. However the other types of confidential information may be much more important, making it all the more important to have contractual restrictions in place.
In general, when an employee is likely to have access to protectable business information, it is wise to include post-termination restrictive covenants and garden leave clauses, which are typically more effective than a confidentiality clause.
Business information misuse via social media
The growth of social media websites such as LinkedIn, Facebook and Twitter presents a new challenge for an employer in protecting its confidential information, especially trade connections and customer contacts.
Some businesses will encourage certain employees to market themselves and the business by online social networking. Where this occurs there is a risk that the employer will be deemed to have waived any claim for confidentiality over its contact list.
On LinkedIn the problem is exacerbated by the contractual terms of membership, which state that the LinkedIn member’s profile is owned by LinkedIn. This raises the question of whether the member’s contract with LinkedIn overrides or is subject to their contract of employment with their employer. In cases of blatant abuse the courts have shown a willingness to side with the employer.
In a landmark case, Gaby Hardwicke Employment Law Services Partner Paul Maynard secured an interim injunction for our client Whitmar Publications Limited to prevent ex-employees accessing LinkedIn group accounts. The court also ordered the ex-employees to hand over passwords and control of the LinkedIn groups. The LinkedIn groups were set up during the course of employment supposedly for the benefit of the employer, but the employees had taken steps to compete against their employer over a year before they resigned.
Well-drafted restricted covenants can protect your business from many of the problems associated with social media contacts. In addition your business should:
- Implement a social media policy that provides guidance on the use of social media accounts and contacts from the start of employment.
- Require employees to replicate business contacts on the employer’s database.
- Take steps to align the employee’s social media account(s) with the employer’s business. This can include using the company email address, logo and website URL within the profile, requiring the password to be surrendered on termination of employment and insisting the social media account is only used via the employer’s computer systems.
- Include an express duty in the employment contract that the employee will only use professional networking to promote the employer’s business and build connections for the employer.
- Include a clause in the employment contract that assigns to the employer any proprietary interest in professional contacts made via social media during the course of employment.
- Impose a contractual obligation to delete all social media connections belonging to the employer upon termination of employment.
For more on this subject including details of the remedies an employer can deploy in the event of misuse or disclosure of protectable business information, defences an ex-employee may use and further ways to safeguard your business information read our Business Information Briefing Note.
Expert legal advice on business information protection
For legal advice on protecting your business information or dealing with a case of misuse contact Gaby Hardwicke Employment Law Services Solicitor and Partner Paul Maynard.
See Paul’s answers to the most commonly asked questions on restrictive covenants in our FAQ videos.
Based in East Sussex but serving a much wider area, Gaby Hardwicke Solicitors has offices in Eastbourne, Hailsham, Bexhill and Hastings.