5 Steps By Employers To Prevent The Use of Confidential Information

October 2017
by Abdullah Abdul Rahman, Derrick Moh

The information in this article is intended only to provide general information and does not constitute professional advice or legal opinion.

@2018 Chooi & Company + Cheang & Ariff.
All rights reserved.

The departure of employees is nothing short of ordinary. Nonetheless, where confidential information pertaining to a company’s business has been disclosed to the departing employee, concerns would surely arise as to the usage of such information by the former employee, be it for a new business or new employer.

There are several means that an employer may adopt in order to control the use of confidential information by former employees. Some of these are early steps to be executed long before an employee resigns. Hence, one must act quickly before it is too late. 

  1. Exercise control over confidential information

    Disclose confidential information, where necessary, only on a need to know basis to trusted personnel. Control the circulation of such information. For example, by establishing a system under which each and every individual who receives such information acknowledges receipt of it.

    The nonchalant attitude of an employer in controlling the access to information that is apparently confidential, could in fact cause such information to be considered non-confidential.  If such is the outcome, a former employee could easily obtain the right to utilize such information beyond the employer’s reach.  

  2. Inform personnel of the confidentiality of information

    As far as possible, personnel to whom confidential information is disclosed should be informed that such information is confidential or ‘secret’. It is worth mentioning that the information is to be handled and utilized with care so as not to be leaked unnecessarily to other parties and of course, competitors. This should be performed in writing with an acknowledgement of such notice by the personnel.

    The rationale is that employees who were never informed as to the confidentiality of information could claim that they were unaware it was confidential. This in turn, may raise doubts as to the status of the information, whether it is confidential or otherwise. If deemed to be non-confidential, former employees could obtain the right to use such information to the benefit of their new business or new employer.

    Nevertheless, failing to inform personnel does not instantaneously render such information non-confidential. By taking all circumstances into account, it may be open to consideration that a former employee actually knows or should have known that the information held is confidential even in the absence of any notice. Should this be accepted, then such information may not be used arbitrarily following resignation. However, this is a more difficult position for the employer to establish. The costs of proving the position would also be higher.

  3. Avoid describing confidential information generally

    If one were to claim that former personnel have abused confidential information, they should be able to identify the exact information in question that is being abused. It must be distinguishable from other information.

    If the description of the information which is said to be confidential is merely general or indiscernible from that of other information, it is difficult to determine if it is indeed confidential. Furthermore, this would be unfair to former employees as they too would be incapable of knowing which information may be used and which are restricted. Certainly, such a scenario would also present an opportunity to escape liability for the use of confidential information.

    It is sensible for information, which is subject to control and represented as confidential under steps 1 and 2 above, to be clearly identifiable in order that employer and employee alike are aware of the boundaries between usable information and restricted information. 

  4. Ensure that the information is indeed confidential

    Information that is not of a confidential nature may be utilized by a former employee at a new workplace.

    The determination of whether certain information is confidential rests upon the circumstances of each case including the practices of a particular industry.  Among the types of information commonly accepted as being confidential are trade secrets. Everyday examples would be the secret recipes for dishes served at a restaurant or the chemical formulae for a particular brand of medication.

    Confidential information is typically secret in nature, difficult to acquire, forms part of an employer’s competitive edge over its competitors and identifiable in particular. Among the materials that have been accepted as confidential information are lists of customers and their details, the prices and types of goods sold by manufacturers, pricing information and costing information. However, it must be borne in mind that each case is determined separately on its facts. Simply because the prices of Company A’s goods were accepted as confidential information, it cannot be presumed that the prices of Company B’s goods would also be accepted as confidential information.  

  5. Know that your former employees have rights

    Individuals who have worked tend to acquire certain experience, skill and knowledge in the course of employment. To the extent that one applies the experience, skill and general knowledge gained through their previous work; an employer may not prevent them from utilizing such experience, skill and knowledge for the purpose of their own business or subsequent employment.

    However, the trade secrets of the previous employer remain off-limits. Further, one may not obtain or make copies of their employer’s confidential information in order to be used after leaving the job, be it for their own business or a new employer. But the experience, skill and general knowledge that remains ‘within the employee’s head’ is typically allowed.

    The awareness of such employees’ rights is crucial in order that an employer does not unnecessarily invest into preventing the use of experience, skill and knowledge by an employee, when the right to do so is indeed existent.          

References:

Faccenda Chicken Ltd v Fowler [1987] Ch 117
Lancashire Fires Ltd v SA Lyons & Co Ltd [1997] I.R.L.R 113
Clerk & Lindsell on Torts, 18th Edition, Chapter 27: Breach of Confidence


The information in this article is intended only to provide general information and does not constitute professional advice or legal opinion.

@2018 Chooi & Company + Cheang & Ariff.
All rights reserved.