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Business Goodwill and Confidential Information

ORJ’s Strategy for protecting Business Goodwill and Confidential Information

motherboards from a computer to depict the business goodwill and confidential informationI am often instructed by clients in connection with concerns over employees misusing or misappropriating confidential information, customer data and client contact lists.

As one Managing Director told me recently data was his company’s most important single asset. That business was a manufacturer turning over in excess of £20m.

Given data and relationships are likely to be paramount to the success and prosperity of your business, what protections do you have in place in order to protect the value that surrounds your data and your employees? If you haven’t addressed this or addressed this properly we have a twelve point strategy that you might choose to adopt.

These include:

  1. Implement appropriate and enforceable restrictive covenants within employees’ contracts of employment. Care should be taken in drafting of covenants to ensure they are enforceable and do not over reach more than it is necessary to protect, otherwise they may fail;
  2. In all employment contracts carefully define “confidential information”, without an express clause the only confidential information protected are trade secrets;
  3. Include and use garden leave clause in all employment contracts; During garden leave staff still owe their employer a duty of good faith;
  4. Introduce a thorough exit interview policy, including the formal hand over and return of all company property. At the same time require employees to provide a signed confirmation they have not retained any confidential information or data;
  5. Where an employee resigns with immediate effect or does not provide the stipulated contractual notice. Do not accept immediate or short notice resignation, confirm they remain an employee and continue to pay them. This gives you greater scope for claims and enforcement as they remain an employee and subject to the duties of fidelity, trust and confidence (see our post about Employee’s breaches of duty of fidelity)
  6. Reiterate restrictive covenants in any settlement agreement or letter acknowledging resignation or dismissal;
  7. Put in place restricted access to and authority over your databases , customer lists and records to prevent copying or stealing of this data;
  8. Implement strict controls of all business social media channels, consider supplying and paying for social media accounts for employees in order to retain ownership of the client data in the account. Consider including clause in contracts requiring employee upon termination to delete all contacts from their social media accounts made during course of employment.

We can’t publish every part of our strategy as it would diminish its effect but following the tips above will go a long way to help and ensure your business data is protected and in case of misuse you can move swiftly to resolve the position. ​

Remember, it is usual to expect a recipient of stolen data such as a competitor to expunge it from their records to the satisfaction of the court at their cost.

If you would like to discuss our strategy or any other issues or concerns you have about protecting your confidential information and data please contact our Senior Partner Patrick Tedstone on 01785 275353.