Time to get Jaws on your side….

Posted 22/10/2012

A sharp set of teeth with bite is what’s needed to protect confidential business information when employees move on to work for the competition.

Employers worried about losing commercially sensitive information when employees move on are being told to tighten up employment contracts if they want to protect themselves and have the courts on their side. 

The outcome of a recent case brought by Churchill Retirement Living Limited has shown how important it is to specify exactly what actions are prohibited to an ex-employee if companies want to protect confidential information.

The former employee of Churchill Retirement had copied a list of contacts and information about two potential retirement development site purchases onto a memory stick before he left to join a competitor.

When they found out, Churchill applied to the courts for an order prohibiting the employee from using the list of contacts and from contacting anyone whose name appeared on the list. They also asked for an order to stop the new employer from making a move on either of the potential sites they had ear-marked.At first Churchill thought that the judgment would go their way, when the judge agreed that taking the list of contacts and the site information could amount to a breach of contract or breach of confidence, and granted an order prohibiting the ex-employee and the new employer from ‘using’ the list of contacts. But the judge refused to go so far as ordering that they must not make contact with the persons on the contact list, because the situation had not been covered by Churchill’s contract of employment. 

When it came to the site purchases, Churchill ran up against the same problem, despite arguing it was highly confidential information because the properties were not for sale on the open market and the proposed sale was not publicly known.

Again the judge would not grant an order to stop the new employer pursuing the sites. Instead, he ordered that the new employer must not use any information relating to Churchill’s profit-margin on any site. The judge went on to say that if Churchill suffered a loss on the sites as a result of the breach of confidence, that loss would be purely financial and easy to calculate, so a claim for compensation would be straightforward.

Julian Outen, Employment law specialist at Ashtons Legal commented:

“This case shows how important it is to include specifics in contracts where staff have access to confidential information. The contract should specifically prohibit actions such as copying and removing confidential information.

In certain cases the contract should also prohibit any contact with clients or other connections of the employer for a specific period of time after the employment has come to an end. If it’s really clear that an action is in breach of contract, then it’s much more likely that the court will grant orders with teeth in them, that should prevent the breach of confidence happening.”