We are all familiar with instances of data being stolen by hackers breaking through the seemingly impenetrable digital walls of a business. Images abound of the hooded figure sat in a darkened room in some far flung corner of the world, creating chaos with the stroke of a key. Recently the NHS and other organisations around the world were hit by a ‘ransomware’ that encrypted their data with the threat of deletion unless a ransom was paid.
It is vital that businesses have adequate cyber security. However, it can be all too easy to overlook a more traditional loss of data – information exploited by employees. How is that information protected?
Many employers believe that their confidential information is automatically protected. Admittedly, there is some protection that arises automatically (see below) but this is still a very risky approach to take.
Implied terms vs express terms
Within an employment relationship there can be both express contractual terms (i.e. those written down in an employment contract) and implied terms (implied into the contract either by fact, law, statue or custom and practice). Paying the national minimum wage is a good example of a contractual term implied by law.
Every contract of employment also has a duty of confidentiality implied into it. This means that every employee will be subject to an implied duty of confidentiality, even where their employment contract is silent on the point, or where they have not even been given a written contract.
Time to breathe a sigh of relief? Maybe not.
The implied duty of confidentiality only applies during employment. This means an employee must not, during their employment, use confidential information belonging to their employer for their own purposes or disclose confidential information or trade secrets to a third party where that confidential information / trade secret was obtained during, or through, their employment.
What about when the employee leaves the business though?
The case of Faccenda Chicken Ltd v Fowler & Sons  sets out that, whilst the implied duty of confidentiality survives employment coming to an end, this is only in relation to trade secrets. This means that any information that is confidential in nature but which does not rise to the level of a trade secret is not protected after the employee leaves!
So, what is a trade secret?
According to the Court of Appeal, examples of trade secrets would be: secret processes of manufacture, e.g. chemical formulae, designs and “other information which is of a sufficiently high degree of confidentiality as to amount to a trade secret”. In the food and drink sector this could therefore be a secret recipe or a secret process. When deciding if something is a trade secret it will be necessary to consider all the circumstances of the case. Naturally, an employer can argue breach of the implied duty of confidentiality if a former employee seeks to use a “trade secret” for their own purposes but if that employee argues that, at most, the information is confidential and not a trade secret then the employer will need the court to decide the matter. Most likely this will involve having to seek an injunction in the interim to try and stop the employee from using the information before the case is heard and so the whole process could prove very expensive.
Is there a safer approach?
Thankfully, yes. Employers should ensure that all employees are subject to express duties of confidentiality set out within a properly written contract of employment. The employment team at Stephens Scown LLP can help with this. If this approach is taken properly then it will protect confidential information as well as trade secrets even beyond the end of employment. Steps should also be taken to make clear to employees what amounts to confidential information rather than leaving them to rely on their own perception. The drafting here is key.
It is extremely unwise for any business to be protecting their confidential information through a reliance on implied terms alone. The fact that a former employee has taken “mere” confidential information rather than a trade secret is likely to be of cold comfort to a business when they are told that because they didn’t put an express confidentiality clause in place, there is little they can do to stop that information being used. Remember, prevention is better than cure.