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Confidential information: How to protect yours after staff leave employment?

Posted: 17th December 2020   In: Business Employment

P14 MEDICAL LIMITED v EDWARD MAHON [2020]

The High Court has recently provided helpful guidance on post terminations and confidentiality restrictions in employment contracts in the case of P14 Medical Ltd v Edward Mahon.

In this case an employer had sought to restrict a former employee with very extensive restrictions including a very wide definition of confidential information.  The High Court held that the post termination restrictions were not an unlawful restraint of trade and granted an interim injunction stop the employee’s unlawful conduct. However the confidentiality restriction was held to be too wide to be enforceable.

Confidentiality restriction

The confidentiality term in the contract of employment defined confidential information in very broad terms and was without limitation in terms of time and so intended to indefinitely prevent the employee from using or disclosing such information. The High Court considered the term too wide because it covered many forms of business information including details of the company’s business, products, affairs, and finances as well as trade secrets and because it did not have a time limit.

If the clause had been limited to trade secrets alone the clause may have been enforceable; however the clause could not be saved by simply reducing the scope of the definition to cover only trade secrets.  As a result, the whole confidentiality clause was unenforceable.

What can we take from this decision?

Simply labelling certain types of company information as confidential under a contract of employment will not guarantee its protection after the employment relationship has ended. Once employment comes to an end the position in terms of confidential information changes. To be protected the information must be of a sufficiently high degree of confidentiality so as to be classed as a trade secret or equivalent.

There is no set definition of a trade secret, however, it will likely be information which, if disclosed to a competitor, could cause significant damage to an employer’s business.  This may include things such as secret manufacturing processes and special methods of construction but also customer lists and confidential price lists provided they are not generally known.  Whether such information will amount to a trade secret will depend on the nature of the information but also whether the employer warned the employee of the confidential nature of the information.

It can be difficult to distinguish information that can be protected from information that is insufficiently confidential and so cannot be protected but it is exceedingly important that employers consider how best to achieve protection sooner rather than later.  This is not something that an employer can address after the employee has left employment.   

Employers should bear in mind that it will be difficult to protect information that is trivial or easily accessible from public sources.  Equally, information that the employee learns during their employment and that can be easily be remembered after the employment has ended is likely not to be protected.

Important tips for employers:

Fundamentally, employers should include confidentiality clauses in their contracts of employment and those clauses should include express terms that sufficiently define the information that they want to protect.  Employer should not cast the net too wide when trying to protect company confidential information and so careful thought should go into what is actually valuable and needs to be protected. 

Employers may also wish to use different definitions of confidential information for protection during the employment and after it ends. 

Employers should also keep their contracts of employment up to date because information that could damage the company or be in need of protection may change over time.

Finally, employers should consider practical steps to protect information that is valuable just in case the terms of the contract are not enough.  If valuable information is secured in a database from which employees cannot make copies or downloads, then the employee will not be able to take any valuable information with them.  Practical steps such as this are as important as contractual terms. 

Please contact Sorcha Monaghan if you would like more information about the issues raised in this article or any aspect of employment law.

Posted by: Sorcha Monaghan
Employment
Luton Office