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Employee’s breaches of duty of fidelity

Damages for Employee’s breaches of duty of fidelity.

There is an implied duty of fidelity in all employment contracts. Employees as part of the duty of fidelity are obliged to keep confidential business information private and are only permitted to use such information for the sole purpose of the employment relationship.

Employees are therefore not permitted to use confidential business information for their own gain or use it in a competing business. Any breach of the duty of fidelity by an employee brings a right to claim damages by the employer.

In Marathon Asset Management LLP & another v Seddon & others 2017, Seddon and Bridgeman former employees of Marathon were discovered following their departure to have copied and retained a number of files containing confidential business information belonging to Marathon. B subsequently admitted this and returned his copies to Marathon when court proceedings were threatened.

Marathon sued both Seddon and Bridgeman for damages, whilst they accepted that the confidential information had not been used and no financial loss suffered they ran the argument that if you take something you don’t own, the law requires you to pay for it; by their very actions Seddon and Bridgeman has exposed Marathon to risk and it was impossible to identify what subsequent use had been made of the confidential information to the detriment of Marathon and to the benefit of Seddon and Bridgeman.

Marathan claimed compensation to value of the confidential information taken by Seddon and Bridgeman and estimated the value to be £15 million. The High Court held that both Bridgeman and Seddon had breached their contractual duty of fidelity and ruled in favour of Marathon. However, when it came to awarding compensation, the High Court awarded Marathon ‘nominal damages’ in the sum of £2 in light of Seddon and Bridgeman’s wrongdoing.

The High Court confirmed in this decision that the objective of damages is ‘to compensate a party for their financial loss’. Where there is no actual financial loss, it follows that there is no right to compensation. This ruling makes it clear that the law does not provide compensation to a party who has been exposed to loss, some harm or loss must actually occur.

Whilst employees have an implied duty to keep confidential business information private. Your business and your confidential information is better protected if you have a robust express confidentiality clause in all contracts of employment which states the requirements, expectations and consequences of breach beyond any doubt.

In such circumstances, employers should look to act quickly where they suspect or are aware of any breach of fidelity of confidentiality in order to limit the potential impact or damage to their business.

If you are looking for guidance with Employment Law, call Patrick Tedstone on 01785 223440 or email patrick.tedstone@orj.co.uk