Closing Pandora's Box: Employment Contracts Key to Keeping a Lid on Commercial Secrets


19th October 2012

Employers worried about losing commercially sensitive information when employees move on are being told to tighten up employment contracts if they want to protect themselves and have the courts on their side.The outcome of a recent case brought by Churchill Retirement Living Limited has shown how important it is to specify exactly what actions are prohibited to a former employee if companies want to protect their confidential and commercially sensitive information.

In this specific case, the former employee of Churchill Retirement had copied a list of contacts and information about two potential retirement development site purchases onto a memory stick before he left to join a competitor. When they found out, Churchill applied to the courts for an order prohibiting the employee from using the list of contacts and from contacting anyone whose name appeared on the list of contacts. They also asked for an order to stop the new employer from making a move on either of the potential sites they had ear-marked.

At first Churchill thought that the judgement would go their way, when the judge  agreed that taking the list of contacts and the site information could amount to a breach of contract or breach of confidence, and granted  an order prohibiting the ex-employee and the new employer from 'using' the list of contacts. But the judge refused to go so far as ordering that they must not make contact with the persons on the contact list, because the situation had not been covered by Churchill's contract of employment. 

Employment law specialist Kate Wyatt of Miller Hendry commented 'This case shows how important it is to include specifics in contracts where employees have access to confidential or commercially sensitive information.  The contract should specifically prohibit actions such as copying and removing this information. In certain cases the contract should also prohibit any contact with clients or other connections of the employer for a specified period after the employment has come to an end. If it's really clear that an action is in breach of contract, then it's much more likely the court will grant orders that should prevent the breach of confidence happening and allow businesses to keep their information safely under lock and key.'

Find out more about Miller Hendry here.

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