In an interim application a High Court Judge has ordered that former employees must delete confidential information
In a recent case decided by the High Court the important issue of confidential information was considered and an interesting outcome for employers to consider.
All employees have an implied term in their contract of employment that they will not disclose the employer’s confidential information and trade secrets or use them for their own purposes during their employment.
Once an employee’s employment has ceased there is only a limited implied obligation in respect of trade secrets.
In order to have wider protection for your business you need to have an express term and then in the event of a breach by a former employee you can apply to the Court for an injunction and/or compensation.
This case involves several employers who all fall into the Arthur J Gallagher group of companies which provides insurance brokerage services.
There are six employee defendants and one company defendant, Portsoken Limited whom the employees all work for. Each of the employee defendants had been employed by Gallagher Group companies prior to working for Portsoken which was founded by one of the employee defendants.
Prior to this hearing there were various applications for injunctions when it came to light that one of the defendant employees was using confidential information to contact customers of the Gallagher Group.
Following an order made by the Court the defendants disclosed about 4,000 documents from August to November 2015 and it was apparent that the use of confidential information was wider than first thought.
In the course of the previous proceedings the defendants admitted the use of the Gallagher Group’s confidential information.
In the application made to the High Court the Gallagher Group sought an order to search the defendants’ electronic devices and databases and destruction of confidential information found on those devices, in order to ensure that their confidential information could be safeguarded from future use.
The Gallagher Group argued that the defendants had already admitted use of the confidential information to further their own business and that damages for this use was an inadequate remedy as it would be difficult to ascertain the damage caused by the wrongful use of the information. Rather a better remedy for future protection was to dispose of the information and ensure it could not be used again by the defendants.
The Judge decided in favour of the Gallagher group and stated that they were entitled to protect their confidential information. The defendants were not entitled to have it or use it and on the evidence the Judge was not satisfied that the defendants could be trusted to seek out and delete such material themselves.
In the Judge’s view an order requiring delivery up of, and imaging of, and search of the defendant’s electronic devices was required to protect the confidential information at this time and before the full trial of the issues.
Points to note
This is an interesting case for employers in that it shows the lengths that you can go to protect confidential information in the event of a breach by former employees.
In this case the Judge was willing to grant an interim injunction on the terms described because there was clear evidence that the defendants had been using the confidential information for their own business interests and had known that what they were doing was wrong.
Action to take
1) Ensure that your employment contracts have a clear clause regarding the use of confidential information during and after employment;
2) In this case various colleagues all went to set up on their own in competition, you can include a clause in your contract which will restrict an employee from going to work for a colleague in such circumstances;
3) Ensure you have well drafted, relevant and enforceable restrictive covenants in your employment contracts.
Arthur J. Gallagher (UK) Ltd and others v Skriptchenko and others – High Court
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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.
The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.