IMAGINE this – a maverick employee once considered an integral part of a company’s fabric bids his farewell to his company. But this departure was with a clandestine twist.
The once-loyal employee was found smuggling the company’s valuable secrets to a rival in the whispers of betrayal.
In the fast-paced information age, companies are often at risk of confidential information theft. Striking a balance between protecting the employer’s interests and an employee’s right to seek employment in similar industry with gained knowledge and experience from previous employment is a persistent challenge.
In a recent Court of Appeal decision, the court delved into the legal intricacies surrounding employees’ duties regarding confidential information.
Citing a move into different industry, an employee abruptly resigned from her former employer. However, it was later discovered that the employee had instead joined the company’s rival. A further digital forensic investigation unveiled the employee’s wholesale copying of the company’s sensitive database and work e-mails.
In response, the company filed a lawsuit against the employee, alleging among others, breach of confidence.
Eventually, the High Court ruled in favour of the company and held the employee to be liable. Dissatisfied, the employee brought her appeal before the appellant court.
The Court of Appeal affirmed the High Court’s finding that the employee was liable for breach of confidence.
To establish a breach of confidence, one must prove three conditions – confidentiality of the information, communication under an obligation of confidence and unauthorised use to the detriment of information owner.
The Court further found that the employee was bound by strict confidentiality duties as stated in the employment contract during and after the termination of employment.
Although the employee argued that the company had not sufficiently set out the confidential information, the Court disagreed. It recognised that there could be many expressions of confidential information in the business context, including but not limited to list of customers and their details, schedules of information, technology and trade secret.
Since the employee did not state any problems in identifying the confidential information nor raised any allegation that the confidential information was so vague to the extent that the employee could not comply with any injunction, the Court was satisfied that sufficient particulars had been disclosed for the Court to determine if the information is confidential in nature.
The employee further explained that she forwarded the work e-mails to herself in order to perform work assigned by the company while she was away from the office. However, the Court disagreed.
Looking at the company’s evidence which shows the type of information she transferred and the extent and manner adopted by the employee in transferring the information, the Court held that the employee was liable for unlawful copying and accessing of the confidential information, hence constituting a breach of confidence.
This case unveils the challenges of safeguarding confidential information in today’s business landscape. The importance of meticulously drafted employment contracts is highlighted, emphasising the need for comprehensive confidentiality provisions during and after employment cessation.
The decision serves as a stern warning against employees engaging in surreptitious storage or misappropriation of confidential information without authorisation, especially in this information age where all digital footprints are traceable.
This case also urges employees to be more sensitive and careful in handling the information obtained during employment – especially for senior management – as it is less likely for them to argue ignorance of the competitive value of this information.
In conclusion, this case shapes the legal landscape on confidentiality, providing insights that resonate in today’s technology-driven employment environment.
Leonard Yeoh is a partner and Chen Mei Yan an associate with law firm Tay & Partners.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.