The protection of confidential information, and in particular client and customer lists, is an important issue for all employers. A recent case in England highlights the potential dangers posed to employers in circumstances where an employee was alleged to have transferred his employer's confidential information to his professional networking site prior to resigning and setting up a competing business.
Employment relationship
In Hays Specialist Recruitment (Holdings) Ltd & Anor v Ions & Anor [2008] EWHC 745, an English High Court considered the question of the confidentiality of client information once it has been transferred to a networking website. This case related to Mr Ions, who had been employed as a consultant of global recruitment agency Hays for over six years until he left to start his own recruitment agency.
Mr Ions' employment contract contained a confidentiality clause that lasted during his employment and continued after its termination. It prohibited the misuse or disclosure of any information of a confidential nature.
The employment contract also contained covenants against soliciting, canvassing, dealing with or accepting instructions from clients or applicants with whom he dealt or had contact during his employment. These covenants were binding during his employment and for a period of six months after its termination.
Hays alleged that during the course of Ions' employment he transferred the e-mail addresses of clients and candidates to his LinkedIn account for the purposes of his new business, in breach of his obligations to Hays.
The concept of professional networking sites Companies are increasingly promoting the use of social and professional networking sites to create and maintain business contacts. LinkedIn is a business-oriented networking site which allows members to establish connections with business contacts.
The LinkedIn site works similarly to that of other social networking sites:
- A member creates a profile containing their professional details;
- Member then uploads contact e-mail addresses;
- LinkedIn sends an invitation to the contact;
- Contact accepts invitation and becomes part of the member's network.
Confidential information and networking sites
The judge accepted that the contact details of clients and candidates were the most valuable asset of Hays and that they were the cornerstone of their business.
Ions' argument was that since Hays encouraged the use of LinkedIn to recruit potential candidates and network with clients, the transfer of information was done with Hays' consent.
He also argued that he only invited contacts, and once the invitation to join his network was accepted, the information was no longer of a confidential nature because it was available to a wider audience through his network.
This case related to the extent of pre-action discovery obligations, and therefore the judge was not required to make findings in relation to the above. However, the judge determined that Hays had reasonable grounds to consider that it may have a claim against Ions on the basis that the information was confidential when he uploaded the e-mail addresses during his employment, with a view to using it for his own competing business and therefore ordered limited discovery.
Implications for employers
This case highlights a potential tension between the use of networking sites for commercial benefit and the protection of the employer's confidential information.
Employers, particularly in client driven industries, should carefully balance the advantages to them of encouraging employees to join professional networking sites against the possible loss of ownership of information that is transferred online and implement policies to reflect their intentions. Any definitions of confidential information in contracts of employment or policies could be worded to include information that the employees have obtained from their employer and that they use for professional and social networking purposes. Employees could also be contractually required to delete such information from their professional sites on termination of employment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.