Post-Termination Restrictions and Confidential Information

Restrictive covenants

When enforcing a restrictive covenant, the court must consider the doctrine of restraint of trade. Any contractual term restricting an employee’s activities after termination is void for being in restraint of trade and contrary to public policy, unless the employer can show that:

• It has a legitimate proprietary interest that it is appropriate to protect
• The protection sought is no more than is reasonable having regard to the interests of the parties and the public interest

Post-termination restraints are enforced by means of equitable remedies such as an injunction, which is granted at the discretion of the court by reference to what the court regards as fair in the circumstances.

Confidential information

Case law has identified four kinds of business information. The category into which a piece of information falls will govern the extent to which the employer can protect it and the remedies available to the employer in the event of its unauthorised disclosure.

The four categories are:

• Trade secrets. These can be protected both during and after employment, even if there is not an express covenant
• Confidential information. Sometimes known as “mere confidential information”, employees must not use or disclose this while their employment continues. Cases usually involve employers seeking to elevate information from the category of merely confidential to the more protectable category of a trade secret
• Information that amounts to the skill and knowledge of the employee. This type of information belongs to the employee and can be used as the employee wishes
• Public information. It is widely accepted that this cannot be protected

Those attempting to protect information should be as conversant as possible with the purpose of the information and its constituent parts. When drafting employment contracts or confidentiality agreements, it is common for legal advisors simply to define “confidential information” using pre-prepared lists of information that are likely to be confidential.

Simply defining information as “confidential” will not, however, be enough to make it protectable. The courts will examine the information, its provenance, and purpose, and the damage it could do (or has done) to its owner if it were disclosed without authorisation. They will then use this factual matrix to determine the proper status of the information and the type and extent of protection to be afforded to it.

To ensure your business is protected from former employees taking confidential information or key clients when they leave, you will need robust employment contracts in place. Contact our experienced solicitors to make sure your business is protected.