Confidential business information protection advice
What is Confidential Information?
Confidential information includes any information that has been disclosed by one person to another, either directly, indirectly orally, in written form, or by inspection of tangible objects, in a way that indicates the information is confidential.
The confidentiality of confidential information is important because it is often important to a company’s commercial success. In many cases, the information is confidential because the company relies on it as their unique selling point (USP). For this reason, confidential information is generally information a company believes would enable a competitor to imitate their company offering.
What isn’t Confidential Information?
Four key factors are involved in determining whether information constitutes confidential information. Namely, information cannot be considered confidential if:
- The information is not involved in generating profits for the company;
- The information is already public knowledge;
- The company does not take the reasonable or appropriate measures to protect the information; or
- The information can only be considered confidential if it was communicated in a confidential manner, e.g. in a private setting.
Confidential Information and the Law
The Data Protection Act 2018 (DPA), the UK’s implementation of the General Data Protection Regulation (GDPR), regulates how organisations, businesses, and the government in the UK can use confidential information.
The DPA sets out strict data protection principles that must be followed by any person using confidential information. The stipulations include a requirement for confidential information to be used fairly, lawfully and transparently, to be used only for explicit, specified purposes, and to be used in a way that is adequate, relevant, and limited to only what is necessary.
Types of Confidential Information
Trade Secrets
Trade secrets are any confidential information that gives businesses a competitive edge, sometimes referred to as a unique selling point (USP). This could include formulas, practices, processes, designs, instruments, or any other confidential business knowledge that is not widely known or easily discoverable.
Intellectual Property
Intellectual property (IP) is, in simple terms, the result of creativity or innovation. Individuals or businesses are granted legal rights to their creative and intellectual inventions or works in various forms including patents, trademarks, or copyrights. These rights allow creators to protect their inventions, branding, and artistic works from unauthorised use and ensure they receive recognition or financial benefits from their creations or innovations.
Commercially Sensitive Information
Commercially sensitive information is data that, if disclosed, may harm the financial interests or competitive position of a business, including information about pricing strategies, marketing plans, customer lists, and sales forecasts. Organisations protect commercially sensitive information to maintain market advantage and prevent exploitation by competitors or malicious entities.
Employment Contract Information
Employment contract information refers to the terms and conditions outlined in an agreement between an employer and an employee. It includes details such as salary, benefits, job responsibilities, non-compete clauses, intellectual property ownership, and confidentiality agreements. This information is considered confidential as it pertains to individual employment relationships and business operations.
Protecting Your Business
Post Termination Restrictions
Post-termination restrictions are clauses in an employee’s contract that limit their activities after leaving the company. These may include non-compete, non-solicitation, and non-disclosure provisions to prevent former employees from using or sharing confidential information, soliciting clients or colleagues, or joining a competing business. These restrictions help protect the company’s interests and reduce the risk of confidential information being exploited after the employment ends.
Identifying Confidential Information
Identifying what qualifies as confidential information and trade secrets is essential for protecting valuable business assets. Confidential information can include financial records, marketing strategies, customer data, and proprietary technology.
Confidentiality Clauses
Confidentiality clauses in employment contracts and business agreements are designed to protect sensitive information from being shared or used without authorisation. These clauses specify the types of information that must be kept confidential, outline the employee’s responsibilities, and set penalties for violations. A strong confidentiality clause provides legal protection to businesses and establishes clear expectations for employees regarding the handling of sensitive data.
Employer Advice on Employee Exits
When an employee exits a company, whether voluntarily or involuntarily, employers should take steps to secure their confidential information. This may include conducting an exit interview to remind the departing employee of their confidentiality obligations, retrieving company property, and reviewing post-termination restrictions. Employers should also ensure that access to sensitive information is immediately revoked, and any outstanding non-disclosure agreements are reinforced.
Injunctions
An injunction is a legal order that prevents a former employee from disclosing or using confidential information. In cases where an employee breaches confidentiality, employers can apply for an interim or springboard injunction to stop further harm. This legal remedy can provide quick relief, halting the employee’s actions and protecting the company from ongoing or future damage resulting from the breach.
Employee Training
Employee training is a key part of protecting confidential information. Businesses should regularly educate employees about the importance of confidentiality, what constitutes sensitive data, and how to handle it appropriately. Training should cover both the legal obligations and practical measures to ensure employees understand how to prevent accidental or intentional breaches.
Confidentiality Breaches
If an employee breaks their confidentiality obligations, the employer’s position is significantly strengthened if the employment contract includes a clear confidentiality clause and well-defined post-termination restrictions. These provisions make it easier for the employer to take legal action and demonstrate that the employee was fully aware of their duties regarding confidential information.
To prevent a former employee from using or disclosing confidential information, employers can seek an interim injunction or a springboard injunction. These legal orders can provide immediate relief by stopping the former employee from taking advantage of sensitive business data. Additionally, if the breach results in financial harm or business loss, the employer may be entitled to claim damages to recover the financial impact caused by the violation.
Business Information and Social Media
Social media can pose a significant risk to confidential business information if this relationship is not carefully managed, as social platforms offer a public and easily accessible space for sharing content. Employees and businesses must be cautious about posting or discussing sensitive data, such as trade secrets, financial details, or client information, on social media.
Companies should implement strict social media policies to protect confidential business information, ensuring employees understand the potential consequences of oversharing or mishandling sensitive data online. Educating staff on how to maintain confidentiality while using social media is essential to safeguarding the business’s confidential information, reputation, and legal standing.
Why work with 365 Employment Law?
Contacting an employment solicitor is an important first step in handling issues regarding confidential information. If you’re looking for employment law advice and support, 365 Employment Law will work with you every step of the way to ensure you achieve the best possible outcome.
We have a wealth of experience advising employers across Sussex in all aspects of employment law. Based out of our office in Worthing, West Sussex, we support employers in a range of contentious and non-contentious employment law matters. Get in touch with our friendly team today for an informal conversation about your needs.
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Frequently Asked Questions
How do I protect my business when I pass confidential information to a third party?
To protect your business, always have a signed non-disclosure agreement (NDA) or confidentiality agreement in place with the third party. Limit the information shared to what is necessary and ensure secure communication methods, such as encrypted emails or secure file-sharing platforms.
What happens if staff refuse to sign a confidentiality agreement or non-disclosure agreement?
If a member of staff refuses to sign a confidentiality agreement, it could indicate a lack of understanding or commitment to safeguarding sensitive business data. You may need to provide further clarification, or in extreme cases, reassess their role within the company.
What should I do if an employee leaks confidential information?
If an employee leaks confidential information, conduct an immediate investigation to determine the scope of the leak. Take appropriate disciplinary action and consider legal recourse if the leak violates a non-disclosure or confidentiality agreement.
Can confidentiality agreements be enforced after an employee leaves the company?
Confidentiality agreements typically remain enforceable after employment ends, depending on the terms specified. Employees may be legally bound to keep certain information private even after they leave the company.
Is it necessary to have a written confidentiality agreement with contractors or freelancers?
It’s essential to have a written confidentiality agreement with contractors or freelancers who access sensitive information. This ensures that they are legally obligated to protect your business’s confidential data.
What’s the difference between a confidentiality agreement and a non-disclosure agreement (NDA)?
While both agreements protect confidential information, a non-disclosure agreement (NDA) is a type of confidentiality agreement specifically designed to prevent the sharing of proprietary information. In essence, a non-disclosure agreement is a formal, legal contract that specifies the consequences of a breach.
How can I protect my business’s intellectual property (IP)?
To protect intellectual property, use patents, trademarks, copyrights, and trade secrets as applicable. Make sure employees and third parties sign appropriate agreements to safeguard the IP, and limit access to it within the company.
Should I disclose confidential information to investors?
You can disclose confidential information to potential investors, but only after they sign a non-disclosure agreement (NDA) to protect your business. Be clear about what information is being shared and why it’s necessary for their consideration.