A Case of Confidentiality

Breach of confidentiality - the starting point

Employees have an implied duty of fidelity and good faith during their employment. The implied duty covers acting honestly, disclosing information relevant to the employer's business, not making secret profits for the employer's business, respecting the employer's “confidential information” and refraining from competing with the employer's business.

Under common law, “confidential information” is defined as trade secrets and information that is either communicated as confidential or obviously confidential. In certain circumstances, the confidentiality of trade secrets can be implied to exist after the employment has ended. But, the common law definition is limited in practice.

Because of the limited scope for employers to protect confidential information at common law employers will often seek to extend their legal protection. Employers can extend the scope in a number of ways.

There are certain circumstances where the employer cannot seek to protect the release of confidential information. For example, whistleblowing, the reporting of criminal or regulatory offences, disclosing information for the purposes of seeking tax, medical or other professional advice and in compliance with any court orders would be permitted disclosures.

Suspending an employee after a breach of confidentiality

Recent case law has shown that suspension is to be treated like any other alleged breach of mutual trust and confidence. Employers must consider whether there is reasonable and proper cause to suspend an employee and whether the suspension will seriously damage the relationship of trust and confidence between employee and employer.

Suspension should not be an instantaneous response to a problem at work. Alternative methods to achieving the same goal should be considered before suspension. For example, if the purpose is to investigate an accusation, it may be possible that such investigation can be carried out without the requirement for suspension, by moving the employee temporarily to a different location or department. In practice where an employer has decided that the relationship is not working out a period of suspension can be helpful in “re-positioning” the employee.

In all cases, it will be important to get the employee's point of view on the incident. Employers will need to show that they were aware of the employee's 'side of the story'. Suspicion is rarely likely to be enough to defend an employment claim. You can have an express right to suspend under an employment contract, companies can also have suspension policies dealing with the rules of suspension. Whilst an employee is being investigated they should continue to be paid. If you do not have a suspension policy or express right to suspend, you could be opening the company to claims for breach of the employee's implied right to receive work.

Dismissal for breach of confidentiality

Dismissal for breach of confidentiality, like any other dismissal must be fair, just and reasonable. . Employment law sets out fair reasons and these are usually based on the employee’s capability, conduct, redundancy or "some other substantial reason". Dismissal for a breach of confidentiality is not a specified fair reason and therefore falls into the category of "some other substantial reason".

What constitutes a 'substantial reason' is undefined, it would therefore seem that employers enjoy the discretion to define what they consider to be a substantial reason, however, common reasons include:

• conflicts of interest
• reputational risk
• a breakdown in trust and confidence.

With no set definition, it is important for employers to ensure that they comply with the overriding principle, that the dismissal is fair and just. In cases of breach of confidentiality, the employer must consider whether the breach is a serious enough case of deliberate misconduct or gross negligence as to justify instant dismissal (as a gross misconduct event) or a severe enough risk to the employer's reputation or breakdown in trust and confidence as to constitute a substantial enough reason to dismiss on the spot. Lesser offences may give rise to warnings but the dismissal could be unfair. This is a very grey area and care is needed before wading in.

What can the employer do to protect itself following a breach?

The contractual remedies available to help employers can include:

• Undertakings – this is effectively a written promise from the employee to the employer that they have not and will not use or copy the confidential information. This will likely refer to the express restrictions discussed above as well as confidential information.
• Injunctions – an employer can apply to court for an injunction or springboard injunction, which prohibits the employee from doing certain activities, this can be done as an emergency application for immediate protection of the confidential information and brand of the business.
• Damages – the financial remedy is for damages, the employer can apply to court to bring a claim against the employee for breach of contract and claim a financial sum that represent the loss that the employer has suffered.
• Account of profit – where there is no breach of contract, or in addition to a breach of contract, and there is a breach of duty because an employee has used confidential information for its own benefit and profit, the employer can bring a claim for an account of profit.

If you are not sure what to do please do call on: 0207 438 1060.