The need for businesses to protect their assets, including intellectual capital - such as confidential information - has become more acute in the current downturn. Departing employees may take sensitive information such as customer lists, trade connections and pricing data in a misguided attempt to give themselves a head start with a competitor.
Recent figures show a dramatic increase in claims brought against employees who misuse their employer's confidential information - claims launched in the Chancery Division of the High Court rose from three in 2006 to 23 in 2008. There is little doubt the courts recognise the damage that this sort of activity can do to a business.
Take the recent case of UBS Wealth Management v Vestra Wealth LLP. After 78 employees of UBS resigned and defected to Vestra Wealth - a company set up by a former UBS managing director - the court granted an injunction restraining Vestra from doing business with or attempting to poach clients of UBS.
What can businesses do to prevent employees from taking and misusing confidential information and so avoid costly and time-consuming litigation? A good starting point is to protect confidential information and restrict competition by incorporating well-crafted confidentiality clauses and restrictive covenants in employment contracts.
While every employee owes an implied duty of confidentiality to their employer, this duty can fall short of providing adequate protection, particularly after the employment has ended. Express contractual confidentiality clauses are strongly recommended. These clauses should be carefully drafted and particular attention given to what exactly the employer regards as confidential. The definition of confidential information should also include specific reference to information that is considered to be particularly sensitive.
Restrictive covenants can prohibit poaching of or dealing with customers and/or employees, in competition with the employer. Again, these restrictions can apply both during employment and after termination. They are particularly important to control the activities of senior employees.