A question of confidentiality

first_imgA question of confidentialityOn 1 Feb 2002 in Confidentiality, Personnel Today Employment lawyers have a great deal to thank Michael Douglas for.Disclosure gave us an insight into sexual harassment in the workplace. WallStreet illustrated the damage that can be done when a key employee leaves andengages in competitive activity. And now his wedding to Catherine Zeta Jonesprovides a masterclass on the law of confidence and privacy. Before the couple’s wedding in 2000, OK! magazine struck a deal with thecouple to pay a large and undisclosed sum for exclusive rights for nine monthsto publish wedding photographs. OK! asserted that rival magazine Hello hadoffered three times the contractual sum but that the couple trusted OK! topublish only the images they wanted. On 20 November, two days after the wedding, Ms Zeta Jones warned OK! thatHello was about to publish unauthorised photographs. The company obtained aninterim injunction but Hello appealed and on 23 November the Court of Appealdischarged the injunction. Hello published its issue three days before OK! thusspoiling completely its rival’s scoop. The decision is of considerable significance. It illustrates: – the common law’s capacity to develop established doctrines and apply themto unprecedented situations; – the growing importance of the law of privacy and its close relation, thelaw of confidence; n the importance of the Human Rights Act 1998 in relation both tosubstantive rights, such as the right of privacy, and to the exercise ofdiscretion in deciding whether to grant an injunction. This is likely toinvolve a balancing exercise between different rights under the EuropeanConvention on Human Rights (incorporated into the HRA), particularly where theright of freedom of expression is involved. Even where a claimed infringementof a right is well-founded, this balancing act may mean that an injunction isrefused. The developing law of confidence The employer often has an exaggerated sense of what is confidential. Tradesecrets and confidential information are identifiable, objective knowledgewhich form part of the employer’s stock-in-trade but do not include theemployee’s skill, experience, know-how and general knowledge. The improbably named Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117, case,identifies three classes of information: – Class 1 is trivial, or easily accessible information from public sourcesand therefore not confidential; – Class 2 is information which the employee must treat as confidential, butwhich remains in his head becoming part of his own knowledge. He cannot use itother than for his employer’s benefit during the contract of employment, but heis free to do so after its termination; – Class 3 is so confidential that, even if it is learned by heart, theemployee cannot lawfully use it for anyone’s benefit but the employer’s, evenafter leaving that employment. In distinguishing between Class 2 and Class 3, the test is whether a personof ordinary honesty and intelligence would recognise the information as theemployer’s property, or as the employee’s own property to do with as he likes.Applying the test requires examining the nature of the employment and theinformation; whether the confidential nature of the information was impressedon the employee; and whether the information could be easily isolated from thatwhich the employee was free to disclose. Protecting confidential information Garden leave may be appropriate where the employee has given notice ofresignation, and the employer believes that the employee intends to useconfidential information to compete with the employer on his own, or by joininga competitor before expiry of the notice period. However, garden leave islawful only if the employer has a legitimate interest to protect (such asconfidential information) and for no longer than is reasonably necessary toprotect it (which may involve difficult questions as to its shelf-life). Express restrictive covenant may state that the employee may not use ordisclose confidential information other than for his employer’s benefit, duringand after the employment, and frequently identifies items of confidentialinformation. Since an employee is under a duty of confidence towards theemployer irrespective of the express terms of the contract, it could be arguedthat an express covenant adds nothing to the common law position. It iscertainly true that the mere mention relating to an item of information asbeing confidential in such a clause cannot of itself make the informationconfidential. However, express confidentiality covenants have two potential advantages.First, they impress on the employee that certain information is, or may be,confidential. Second, certain judges appear to be of the view that a widerrange of information is to be treated as confidential for the purpose of anexpress confidentiality covenant than under the implied duty of confidentiality.Non-competition covenant The drawback of the restrictive covenant is thedifficulty an employer faces in policing the employee’s compliance. An employeris likely to face formidable difficulties in establishing that an employee hasmisused confidential information. It may be easier to keep the employee out ofthe relevant market all together for a limited period through a non-competitioncovenant. The implied duty of confidence is a last resort, since the courts arereluctant to stretch the implied duty of confidence if an employer has nottaken the trouble to incorporate an express restraint on the employee’spost-termination activities. The springboard principle is where confidential information has been used byan employee in a competing business, but where the information is no longerconfidential because it has entered the public domain or is no longer availableto the employee. However, by his past misuse of the confidential information,the employee has unlawfully gained a springboard or head start for hiscompeting business. There is controversy about springboard remedies and theyhave not yet been fully explored by the courts. Common problems A number of problems arise in relation to enforcing the duty of confidence,including a decision on how to plead the case. If the employer’s legal advisersget this wrong it can have catastrophic consequences. One pitfall is thetemptation to plead confidentiality for a wide and general body of information.For example, it might be claimed that “the claimant’s manufacturingprocess” was confidential, or that “the defendant had knowledge ofthe claimant’s confidential financial and other business affairs”. Such aplea is not always without reason. The matter is urgent, the claimant needs toget an injunction at short notice, and it is more expedient to plead in generalterms, at least at the outset. However, it may be counter-productive if thisresults in the court throwing the claim out all together. The court could hold it to be an abuse of the process of law to giveparticulars of information which is not truly confidential. It will not allowan approach based even in part on wide and unsupportable claims ofconfidentiality which could be used as an instrument of oppression orharassment against a defendant, or to destroy an ex-employee’s ability toobtain employment or a competitor’s ability to compete. The wider the claims, the longer and more expensive the litigation. The Human Rights Act 1998 The decision in Douglas v Hello! (2001 QB 967) highlights the importance ofthe HRA in such cases. Section 12 applies where the court is consideringwhether to grant any relief which might limit the right to freedom ofexpression. Section 12(3) provides that there should be no restraint onpublication before trial unless the court is satisfied that the applicant islikely to establish that publication should not be allowed. This may requirethe court to anticipate how the balance might be struck between competingConvention rights of the right to privacy and the right to freedom ofexpression as it did here. The Douglas case also demonstrates the importance of the principle thatinjunction-seekers should have “clean hands”. Lord Justice Brookesaid he was not sorry to refuse an interim injunction, because it appeared thatOK! had engaged in similar spoiling tactics directed at Hello in the past. Finally, the case demonstrates the fluidity of the law. Adaptingwell-established principles to a changing technological environment, coupledwith the impact of the Human Rights Act, means that this field is now ripe fordevelopment under the influence of creative and ingenious arguments fromemployment lawyers. Paul Goulding is a QC at Blackstone Chambers.  This article is abridged from a paper presented to the EmploymentLawyer’s Association in December Comments are closed. Related posts:No related photos. Previous Article Next Articlelast_img read more