Confidence trick

With access to business critical information, professional services employees need to be clearly informed of their duties regarding confidentiality. And breaches can work both ways, says John Sherratt

Perhaps more so than in other industries, employees in professional services often have access to information critical to the health and wealth of their employer's business. It is essential, therefore, that employers take appropriate steps to prevent any information that provides them with a competitive edge from getting into the hands of competitors. With careful planning and the implementation of well-considered policies and procedures, employers can protect themselves.

Damages claim

A duty of confidentiality is owed by employees to their employers both during the employment relationship and afterwards. If an employee discloses confidential information, either during or after the termination of the employment relationship, they may be in breach of duty, which may lead to a claim for damages.

The duty of confidentiality exists to protect information that, if disclosed, would cause harm to an employer. Confidential information will usually only be protected if it can be classified as a 'trade secret'. Unfortunately, there is no generally recognised definition of a trade secret that can be unilaterally applied to all businesses and, in addition, employee know-how acquired during employment cannot be protected.

Employee awareness

It is advisable that all contracts of employment contain at least a basic confidentiality agreement that makes employees aware of their obligations during and after the termination of their employment. Employees who will be subject to more sensitive information may need a more specific confidentiality clause.

Clauses that restrict an individual's actions after they have left their employment are void as a general rule, unless they are reasonable. In order to be reasonable, they must protect a legitimate interest of the employer and be drafted so as to specifically protect that interest and no more.

What if confidentiality has been breached? In order to claim a breach of confidentiality, an employer must show that the employee disclosed information; the information disclosed possessed the necessary quality of confidence; it was parted in circumstances that conveyed an obligation of confidence; and the disclosure was unauthorised.

If an employer has a suspicion that confidentiality has been breached by a previous employee, that employee can be sued. This, however, is a time-consuming and costly procedure and is, therefore, not usually pursued to conclusion - except in cases where the breach has cost the employer substantial losses.

Written warning

It is usually more practicable for the employer, or its representative, to write to the employee informing them of the breach and requesting they cease breaching confidence or risk legal proceedings.

If the individual does not stop acting in breach, the employer can claim damages and, if necessary, apply for injunctive relief to prevent further disclosures.

Act on it

Equally, employers must be aware of exceptions to the duty of confidentiality.

The Public Interest Disclosure Act 1998, provides workers who disclose specified forms of information with protection.

If a worker reasonably believes that: a criminal offence has been, is or is likely to be committed; a person has failed, is failing, or is likely to fail to comply with the legal obligation; a miscarriage of justice has been, is or is likely to occur; the health or safety of an individual has been, is, or is likely to be endangered; the environment has been, is, or is likely to be damaged; or information tending to show any of the above has been, is, or is likely to be concealed, the worker can disclose this to their employer or another responsible person. If they make this disclosure during their employment, they are protected from being dismissed due to the disclosure.

Employees themselves also hold certain rights to confidentiality. The Data Protection Act allows employees to access data about themselves held by the employer in order to challenge inaccuracies and claim compensation for any losses due to those inaccuracies.

Certain data, particularly sensitive data, can only be disclosed by employers in exceptional circumstances. Employers must, therefore, always keep in mind that although employees have a duty of confidence in relation to trade secrets, employers must also respect their own duty of confidence to employees.

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