Planned litigation no excuse for 'stealing' confidential information – Out-Law.com
Employees who leave and take confidential information with them sometimes use the excuse that they needed for the purposes of litigation – litigation they are planning to bring against you, such as a whistleblowing claim. Is that a good reason for taking your most valuable assets? Is there anything you can do to protect the business from that happening?
A useful case has been handed down by the High Court on this very point – it’s called Zoll Medical UK Ltd v Trebilcock where this is precisely what happened. We will come onto the implications shortly but first the facts briefly.
The claimant company discovered that when their UK Operations Manager left the company, he had emailed all sorts of confidential and commercially sensitive information to himself, and to a company which he had set up. It comprised financial and strategic plans, commercial terms with business partners, customer lists and contact information. He didn’t deny it – he simply said he’d taken it to support a whistleblowing claim that he was planning to bring against his former employer, the claimant in this case. He said he knew about the various confidentiality obligations in his contract of employment but, as far as they were concerned, legally, they fell away because under the UK’s whistleblowing legislation any such obligations are void insofar as they purport to prevent a worker from making a “protected disclosure”.
The High Court rejected that argument and made delivery-up and deletion orders on the basis that the litigation didn’t justify his actions. Furthermore, those orders didn’t prevent him from pressing on and making protected disclosures as a whistleblower. So, a good outcome and a welcome decision.
So, let’s get some reaction to it and look at what it means for employers. Chris Evans is one of a team involved in advising clients on ways to protect their confidential information. I phoned Chris and asked him about that excuse – which is all too often used by departing employees – that what they did was justified:
Chris Evans: “So, it’s always been a case that, certainly when I’ve been advising clients that when you have an individual who has taken information and purports that they needed that information for a tribunal claim or High Court claim or similar, that actually that is not a justification for them taking that information in the first place because it’s confidential information of the client and the appropriate way for them to obtain that information would be through the disclosure process as part of a tribunal or court process. There was a previous decision in a case called Brando which gave an opinion that, actually, from the judge’s point of view, they doubted the possibility that litigation could ever justify an employee taking confidential information for their own use. The difficulty is that it wasn’t the basis of that claim so whenever we try to use that going forwards it’s distinguished by claimant lawyers, for example, that actually no, it is necessary for the following reasons. The benefit of the Zoll case is it confirms that the thinking in Brando is effectively good law and it applies that decision-making on the basis that there he doesn’t justify staff taking confidential information just to support an underlying claim that they think they might have, and actually the appropriate process that they need to go through is the disclosure process as part of the court or tribunal proceedings. Now, the benefit for employers is actually that this acts as a very good sword to defeat and to apply pressure as part of any claim. So, very often what we find as part of a pre-action process is that we will be aware from correspondence from lawyers, or from the employee direct, that they do actually have this information and it allows us to go back to them and say, well, hang on, how have you managed to obtain this information? What have you retained? What have you got? It allows us to apply pressure in that regard. So, it’s a wonderful litigation tactic that we can that we can apply. Equally, it reinforces the fact that staff should not be taking this confidential information and it encourages, or should encourage, employers to think well how can we ensure when an employee leaves the office permanently, how can we ensure that they don’t take confidential information with them? My view is always you ought to be asking staff when they leave that they confirm that they haven’t got anything belonging to the company and if there is a suspicion, then you can start doing your forensic analysis of hardware, email servers, etc, obviously, always subject to having done an impact assessment from a data protection perspective. The decision, however, does allow a real benefit to employers, it works in their favour and avoids information walking out of the door and staff being able to just turn around and say, well this is needed for ongoing litigation, or prospective litigation, and it would be an absolute nightmare to manage for employers if it had gone the other way.”
Joe Glavina: “Chris, can I ask you about the position of the new employer who has recruited this individual – perhaps from a competitor. They’ll be delighted to benefit from this confidential information coming across to them. What’s their position? There’s obviously a problem if they’ve actively encouraged the individual, but what about simply turning a blind eye to it?”
Chris Evans: “I don’t think employers should turn a blind eye. Very often, if information comes on to their systems, then typically the approach that we would take if we were acting for a client would be to issue pre-action letters and get them involved in any potential litigation. Now, even if they are squeaky clean in that they didn’t know anything about it, and don’t want the information, for example, it’s still on their systems and they still need to get rid of it. It would be much better for them to turn around and say, well, no, we asked the necessary questions at the start, we’re very clear that we don’t expect or want any confidential information from another employer to come over to us, and they can then legitimately turn around to any pre-action letter and say, we’ve done our due diligence, we don’t believe we’ve got anything but to the extent we have we’ve taken every possible step to ensure it hasn’t come on to our systems, and it then avoids being embroiled in potential litigation and having forensic experts come and wipe computers clean, etcetera. So, from my perspective, certainly turning a blind eye, while it may achieve something in the short term, in the long term it certainly could create a significant headache for an employer.”
We should flag that Chris talked to this programme earlier this week about the High Court case of Quilter. That’s ‘One-size-fits-all’ approach to covenants risky after Quilter’ where Chris explains how it has caused a number of employers to review their restrictive covenants. That programme is available now for viewing from the Outlaw website.