Competitive edge or criminal act?

Employees who take customer or client information when they leave their job might want to reconsider their actions following a recent warning from the Information Commissioner’s Office (ICO).

An employee who, in anticipation of his departure from the company, emailed himself the details of 957 clients has been prosecuted under section 55 of the Data Protection Act for unlawfully obtaining data. The information comprised not only contact details but other commercial information regarding clients’ purchase history; information which would be very valuable to a competitor. In this case, the employee’s actions amounted to a criminal offence.

The threat of a referral to the ICO might well deter employees from walking away with confidential information, whether hard copies or electronic versions, but employers should not substitute this for well-drafted post-termination restrictions.

These are designed to provide a remedy for businesses that suffer financial loss because an employee has poached clients, suppliers or staff or has set up in competition down the road using all the knowledge gained whilst employed. Often the threat of enforcement is enough to stop an employee in his or her tracks but the courts will look very closely at the wording so it’s important to get it right.

Practical tips for protecting your business:

  • Put post-termination restrictions in place for new employees; you can’t try to enforce them if they aren’t there. Think about preventing competition, soliciting clients and poaching key members of staff.
  • Review post-termination restrictions before employees are promoted. Will they still be appropriate or should they be amended? Restrictions should be commensurate to the role and risk to the business and amended restrictions should form part of a promotion offer.
  • Ensure post-termination restrictions are clear and tightly worded. Think about the type of risk posed and consider geographical boundaries and duration of restrictions.
  • Don’t try to sneak post-termination restrictions in covertly. If you can show that the employee understood and accepted the terms, you’ve got a far greater chance of being able to rely on them.

To discuss post-termination restrictions or if you need help drafting, implementing or enforcing them, speak to any member of the Employment team.

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