Preventing Former Employees Stealing Information

Ex-employees stealing confidential information

Following the economic downturn experienced in the United Kingdom over the last couple of years, there has been an increase in employees who are leaving a certain company stealing information which is confidential to that company.

Why would an ex-employee wish to do this?

Often many people have been forced to leave their jobs during the recession by way of a redundancy. Often the ex-employee may feel bitter about this fact and wish to harm the company in some way but the main reason is to get ahead in a new potential job. Individuals may feel that confidential information such as this is may be essential in their new job. Other individuals may start up their own company in direct competition to their previous employer. If this is the case then confidential information regarding their previous employer may put them at a specific advantage.

What kind of confidential information are we talking about?

The kind of confidential information that we are concerned with in this area is that related to trade secrets or business practices.

If an individual is looking to set up their own company then certain confidential information may be used to tempt clients of their previous employer to come to their new company.

As an employer is there anything which I can do to prevent certain staff doing certain practices following the termination of their employment?

One of the best ways that employers can guard against this situation is by ensuring restrictive covenants are written into staff contracts. These restrictive covenants will come into play once the member of staff is no longer under contract with that particular employer – accordingly they are termed post-termination obligations.

What are the different types of post-termination obligations?

The different types of post-termination obligations are as follows:

  • Non-compete covenants – these prevent employees working for a competitor for a set period after leaving the company
  • Non-solicitation covenants – these prevent employees from forming agreements will former customers for a set period of time
  • Non-poaching covenants – these prevent the poaching of former colleagues
  • Confidential Information covenants – these provide restrictions on the use of confidential information

Will these restrictive covenants be able to be written into all of the staff contracts?

For these restrictive covenants to be fully enforceable they should only be written into the contracts of those members of staff who have access to this kind of confidential information and hold a high-profile role within the company.

How should I decide which employees should be subject to these kinds of restrictive covenants?

In order for the restrictive covenants to be enforceable an employer must be able to show that they have given due thought as to who the covenants should apply to and have not simply written them into all employment contracts for the company.

Can I make the covenants as wide as I wish?

It is good practice to make the covenants as specific and as narrow as is possible. If they are viewed to be too wide they may not be able to be enforced.

Should I review certain restrictive covenants when an employee is promoted to a higher position within the company?

When employees are promoted through the company it is important to ensure that any restrictive covenants are reviewed. Under TUPE (Transfer of Undertakings (Protection of Employment) Regulations) restrictive covenants do transfer and continue to apply but only in their original form. This means that if an employee is promoted to a more high-profile position with potential access to more confidential information any restrictive covenants in their employment contract should be reviewed in order to make sure an employer is fully covered.

If certain employees are leaving should I be vigilant to ensure they are not stealing confidential information?

Often employees who have been made redundant will decide to set up their own business in direct competition to that of their previous employer or will be leaving for a new employer.

It is in this situation where there may be the potential for confidential information to be stolen.

What should I do in this situation?

If an employee who is leaving to set up their own business is exhibiting strange behaviour such as spending a lot of time by the photocopier it may be wise to monitor the employee to see if this is the case. This may involve checking records in relation to that employee’s email and telephone.

Employers must, however, be careful not to infringe the Data Protection Act 1998 when doing this.

Can I take any legal action against an employee who is doing this?

Where an employer suspects any form of wrongdoing in this situation they are able to go straight to the courts and request an injunction or ask the employee to agree to an undertaking that they will discontinue the damaging action.

What must I show in order to be granted this?

An employer will need to show on the balance of probabilities that there has been a misuse, misappropriation, or a clear intention to misappropriate confidential information.

Accordingly an employer will then have to decide what value the information is to their company and whether the actions of the employee is in fact causing them loss.

Should I speak to the employee first?

In certain situations it may be good practice to speak to the employee first and in some cases their new employer (if they are moving to another company rather than setting up on their own). However, this is up to the employer who may decide that the best course of action would simply be to apply for the injunction.

What will I need to do when seeking an injunction?

When an employer is seeking an injunction they should submit a statement of case to the court including witness statements.

What will the court then do?

The court will then decide whether or not to apply an interim injunction – this will be able to put conditions on the defendant until the case is heard.

As well as ordering an injunction as the final outcome the court may also decide to award damages where there has been a breach of fiduciary duty.