A Case of Confidentiality

Breach of confidentiality - the starting point

Employees owe their employers an implied duty of fidelity and good faith during employment. This includes acting honestly, disclosing information relevant to the employer’s business, not making secret profits at the employer’s expense, protecting confidential information and refraining from competing with the employer while employed.

Under common law, confidential information generally includes trade secrets and information that has been communicated in confidence or is obviously confidential. In certain circumstances, protection for trade secrets may continue after employment ends. However, the common law protection is limited in practice.

Employers will often seek to extend this protection through express contractual provisions. Employers can extend the scope in a number of ways.

There are circumstances in which an employer cannot prevent disclosure. These may include protected whistleblowing, reporting criminal or regulatory offences, seeking tax, medical or other professional advice, and disclosures required by a court order, subject to the applicable legal requirements.

Suspending an employee after a breach of confidentiality

Suspension must be approached carefully, as an unjustified suspension may breach the implied term of mutual trust and confidence. Employers should consider whether there is reasonable and proper cause to suspend the employee and whether the decision could seriously damage the employment relationship.

Suspension should not be an automatic response to a workplace concern. Employers should consider whether the same objective can be achieved through less disruptive measures, such as temporarily moving the employee to another location or department while an investigation takes place.

In all cases, employers should consider the employee’s account of the incident and the available evidence. Suspicion alone may not justify suspension or disciplinary action. An express contractual right or suspension policy may help clarify the employer’s powers, but does not remove the need to act reasonably. Employees should generally continue to receive their normal pay during suspension. Without an appropriate contractual basis, suspending an employee may expose the employer to a claim, including for breach of the implied right to work in certain circumstances.

Dismissal for breach of confidentiality

Dismissal for breach of confidentiality, like any other dismissal, must be fair where the employee has the relevant statutory protection. Under the Employment Rights Act 1996, potentially fair reasons include conduct, capability, redundancy, illegality and some other substantial reason.

A breach of confidentiality may amount to misconduct or, depending on the circumstances, gross misconduct. Alternatively, the risk to the employer’s business or a breakdown in trust and confidence may potentially constitute some other substantial reason. Relevant considerations may include:

• Conflicts of interest;
• Reputational risk; and
• A breakdown in trust and confidence.

Employers must assess the seriousness of the breach, the evidence available and the circumstances as a whole. They should follow a fair procedure and consider whether a warning or other disciplinary action would be more appropriate. Summary dismissal should only be considered where the conduct is sufficiently serious to justify it. Care is needed before taking action, as an unfair dismissal claim may arise if the legal requirements are not met.

What can the employer do to protect itself following a breach?

The remedies available to employers may include:

• Undertakings – a written commitment from the employee not to use or disclose confidential information and, where appropriate, to return or delete confidential material.
• Injunctions – an employer can apply to court for an injunction or, where appropriate, a springboard injunction to prevent misuse of confidential information or restrain activities that could cause further harm.
• Damages – an employer may bring a claim for damages to recover losses caused by a breach of contract, subject to the applicable legal principles.
• Account of profits – where the legal requirements are satisfied, an employer may seek an account of profits made through the misuse of confidential information or breach of duty.

If you are unsure how to respond to a breach of confidentiality, call us on 0207 438 1060.