Duty of confidentiality post employment

Workplace confidentiality

Does a departing employee have a duty of confidentiality? Can an employer deter the employee and new employer from using its confidential information?

Unfortunately, without express written agreement from the employee the employer can be in difficulty.

What are the employees implied duties of confidentiality?

It is an implied term of employment that whilst employed and afterwards that an employee must not:

• Disclose to third parties the employer’s confidential information and trade secrets, if obtained during and as a result of, the employment;
• Use the employer’s confidential information for their own purposes.

So, it;s important to ensure that employees are reminded of their implied duty of confidentiality (in addition to express duties in the employment contract and/or any employe confidentiality policy) during employment. To reduce risk further, we recommend also educating employees about their contractual duty post-termination. In practice, once employment ends the implied duty of confidentiality survives only to protect genuine trade secrets.

How to make express provision for employee confidentiality

Relying on the implied duty of confidentiality does not put the employer in as good a position as relying on an express duty.  There is very often resistance from the employee as to what is covered and what is not.  A number of important clauses such as not to copy client databases and use them are not automatically implied into any employment agreement.

Best advice for employers is to define ‘confidential information’ sufficiently widely in the contract of employment to include everything your employees may create or access whilst employed.

If the employer wants to amend an existing employment agreement to deal with, for example, confidential information in detail, it will need the employee's written consent. If an employee withholds consent to the change to his employment agreement unreasonably there may be grounds for dismissal.

How to define employment confidential information

The definition of confidential information might include:

• Existing and prospective activities of the business e.g business plans, financial information.
• Existing and prospective customers, including customer lists.
• Existing and prospective suppliers;
• Existing and prospective marketing information e.g plans, strategies, tactics.
• Research and development activities.
• Any information given to the employer or employee in confidence by customers, suppliers, employees, other business contacts.
• A term requiring an employee to delete and return confidential information is usually enforceable.  Courts do order the destruction of confidential information on ex-employee’s work and personal electronic devices. If necessary, the court order could stretch to their new employer’s devices.  Employers can expect employees to resist interference with their personal devices unless the employer has reserved the ability.

Include confidentiality clauses in a settlement agreement

Employers can restate confidentiality obligations in a settlement agreement. This is useful if the employment contract was wrong, or the employer wishes to enhance the original obligations.

To be legally effective, if you restate the obligations then the ex-employee should receive payment in return. The payment for the re-stated obligations is taxable under PAYE. There is often little guidance as to the re-stated obligation’s taxable value.

A few simple steps, that often don’t appear important, can protect your business and keep you out of court. Get in contact to find out how we can help.