Originally published in People Management, 6 September 2011
It remains to be seen how far the law can protect employers' business interests from exploitation by ex-employees using social media.
Social and business networking sites are proliferating. As of 22 March 2011, LinkedIn reports more than 100 million registered users. Many employers now actively encourage employees to register and to develop existing and prospective client relationships using LinkedIn. Employees, often during work time, are busily building up extensive networks of contacts.
The information being collated by an employee on LinkedIn is a potentially valuable asset which may be used to compete against the employer after the employment relationship has ended.
The use of LinkedIn therefore raises some interesting questions for employers, particularly in respect of the protection of its business interests and, more specifically, its client lists.
Ownership
The question of ownership is likely to be a disputed one, especially after the employee has left employment. The Copyright and Rights in Databases Regulations 1997 (the "Regulations") provide that a database made by an employee in the course of employment is the property of his employer, subject to any express agreement to the contrary. It would be unlawful to copy or extract such a database from an employer's IT systems.
However, although the Courts have held that lists of email addresses contained in an employer's email system are databases that belong to the employer, it is far from certain that LinkedIn contacts held on a third party server and not backed up by the employer would be considered as databases for the purposes of the Regulations. If not, then an employee would potentially be able to retain the LinkedIn contacts for his own benefit on termination of employment.
Confidentiality
Certain information that is not so confidential as to be a trade secret may fall into a second category of what the Courts have termed "mere confidential information". This is still proprietary information belonging to the employer and, so long as an employee remains in employment, employees may not use or disclose this information without breaching their contractual obligations. This usually includes the employer's client lists.
In the absence of an express contractual provision to the contrary, "mere confidential information" acquired during employment may be used by an employee after employment for his own benefit in competition with his former employer. It is open for an employer to protect this information post-employment.
However, if client lists held on an employer's systems are confidential, do they remain so once an employee has made them public on his LinkedIn profile, which is viewable by each and every contact on that list? There is no clear answer to that question and it remains to be tested whether the identity and contact details of clients included on LinkedIn will remain confidential and therefore protected.
In one case, an employee uploaded his employer's client information to his LinkedIn profile with a view to using it for his own business postemployment. Post-employment, the employee argued that the information was no longer confidential because it had been made publicly available on LinkedIn. The Court seemed to accept that. However, it held that if the employee had uploaded the information not for his employer's benefit but for the benefit of his post-termination business, the employer would have a claim against its former employee even if the confidentiality in the information had been lost.
An employer could, or course, expressly state that such information is confidential and must not be uploaded or copied to an employee's LinkedIn profile. It could insist on a return to index cards and rolodexes. However, that would prevent the employee, and ultimately the employer, from enjoying the benefits that LinkedIn offers its users.
Post-termination Restrictions
A well drafted post-termination restriction preventing an employee from soliciting clients or prospective clients would almost certainly prevent an employee from using his LinkedIn profile to solicit the custom of his former employer's clients.
However, it is sometimes difficult to determine what constitutes solicitation and what does not. It has been suggested that setting up in business and appealing generally for custom will not amount to solicitation. A specific and direct appeal to a former employer's clients would, however, amount to solicitation.
Possibly one of the first steps a former employee will take on taking up new employment will be to update their LinkedIn profile with details of their new role and employer. This will immediately trigger an automated message to that user's LinkedIn contacts, including his former employer's clients. That action alone may fall foul of a well drafted non-solicitation clause, if it was found by a Court to be a targeted approach to clients.
However, until tested, whether updating a user's LinkedIn profile in this way would amount to solicitation remains open to some doubt. The answer to this may be to include a non-dealing clause, which would avoid the need to prove solicitation altogether.
Practical Steps
The use of LinkedIn and other networking sites present new challenges for employers trying to protect their business interests. However, the extent to which the law will allow such protection using more traditional concepts, such as database rights and confidentiality, remains unclear.
We therefore recommend that employers;
- Review and if necessary update existing policies on confidentiality and client lists to include information on LinkedIn.
- Ensure that non-solicitation covenants are sufficiently broad to prohibit solicitation using LinkedIn.
- Consider including in employment contracts a well drafted non-dealing covenant if you do not already do so.
- Include a provision in employment contracts and/or termination agreements to require an employee to delete client contacts from LinkedIn on termination of employment or even to delete the account in its entirety.
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.
