Out-Law News 2 min. read

Businesses should review restrictive covenants for long-term staff to address risk of confidentiality breaches, says expert

Businesses should review the restrictive covenants written into their employees' contracts on a regular basis to ensure that the terms provide fitting protection against the risks of confidentiality breaches, an expert in dispute resolution has said. 

Andrew Herring of Pinsent Masons, the law firm behind Out-Law.com, said that he has seen cases where longstanding members of staff holding senior positions with access to commercially sensitive information are subject to no or outdated restrictive covenants based on the original terms of employment that they signed upon joining the business in more junior roles.

Reviewing restrictive covenants in employment contracts is one of a series of measures businesses should consider to help prevent confidentiality breaches arising, Herring said. However, he said that further safeguards should be implemented around employee exit procedures too.

"The more senior or important a person is to the business the more thorough the employer should check they are complying with confidentiality clauses and restrictive covenants when that person leaves the company," Herring said.

"A major issue that often arises concerns the protocols businesses follow when leavers return company assets, such as mobile devices and laptops. Often these are quickly wiped of data by IT departments so that they can be used by another staff member. Unfortunately this can mean important evidence showing that a leaver has taken commercially sensitive information with them, such as customer databases, new product ideas or other confidential data, is erased," he said.

Herring said it is important that businesses take a holistic approach to managing confidentiality risks around exiting employees. The risk is being taken increasingly seriously at board room level, which he said was unsurprising given that an independent study by Symantec found that half of all employees who left or lost jobs kept corporate confidential data, and 40% said they planned to use it in new roles. HR, IT and legal teams should all be involved in the risk management procedures, he said.

Although he said "prevention is better than cure", Herring identified measures businesses can take to address the potential misuse of confidential information taken from them.

"If a confidentiality breach does occur then it is vital that businesses act swiftly so as to limit the damage that could arise should confidential information be misused," Herring said. "Businesses may be able to reach an agreement with the leaver which involves the return or destruction of confidential information and a commitment from them not to use it in new commercial roles. In other cases it may be necessary to obtain an injunction from the High Court to achieve that. These injunctions can be against former employees and/or their new employers."

"The courts will often consider 'springboard' injunction applications from wronged businesses to deny rival competitors an unfair competitive advantage from using misappropriated confidential information for a specified period," he said.

"The injunction takes its name from the fact that misuse of confidential information is deemed to provide a company with an unfair competitive advantage that allows it to spring forward to a position it would otherwise not be in. A court imposing a springboard injunction will therefore apply the relief it provides - essentially a prohibition on the use of the confidential information - until a date in the future when it believes the rival company would have reached, by fair means, the same position had it not misused the misappropriated confidential information," he said

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