What is a duty of confidentiality?

Irreparable damage can be done to a business whose trade secrets are leaked to a competitor. Here, we discuss the duties of confidentiality owed by staff during and after their employment and the remedies available to employers whose employees breach these duties.

What classifies as confidential information? According to Case Law, for a piece of information to be considered confidential it must have ‘the necessary quality of confidence about it’. The information cannot be of public knowledge, useless information or trivia. To be protectable, the information must be inherently confidential – it must also have been imparted in circumstances importing an obligation of confidence.

The Duty of Confidentiality. All employment contracts contain an implied term that employees will conduct themselves with fidelity and good faith. This duty includes an obligation not to disclose to third parties the employer’s confidential information and trade secrets obtained during employment.

Breach of Confidence. A breach of confidence would be for an employee, whilst employed, to disclose or use for their own purposes information which is part of their skill and knowledge acquired during employment – unless that skill or knowledge is generally available and non-confidential.

Trade Secrets. The Court of Appeal defined a trade secret as ‘secret processes of manufacture such as chemical formulae or designs or special methods of construction or other information which is of a sufficiently high degree of confidentiality as to amount to a trade secret’.

After the employment relationship has ended, information which is confidential but falls short of being a ‘trade secret’ ceases to be protected.

Settlement Agreements. There is no duty requiring an employee to surrender confidential information to their employer at the time their employment ends unless this is expressed the contract. In the absence of such a term, employers usually refer to it within a Settlement Agreement. Employers may impose a non-competition covenant on an employee during their employment or include one within a Settlement Agreement.

When may Court action be required? In the event of a breach or suspected breach of confidentiality, the employer will need to seek an injunction against the ex-employee and/ or a third party. Alternatively, or in addition to an injunction, the employer may seek damages i.e. compensation to recover the loss suffered due to a breach of confidentiality in order.