Departing employees: managing confidentiality

You almost certainly protect your business’s confidential files against external attack, but what if they are taken by departing employees? If you thought that substantial damages would automatically be payable, then think again.

In a recent case involving Marathon Asset Management LLP, an investment management firm, two senior employees copied highly sensitive information before joining a rival firm. The information included a list of clients who had redeemed their investments — a ready-made target list for a competing business.

Marathon valued the information at £15 million and sought this amount as damages. Although the court found the two employees in breach of their contracts of employment, damages were assessed at a nominal £2. Crucial to this decision was the fact that Marathon suffered no financial loss, with one defendant not accessing any of the files and the other just a few. The court’s approach in setting damages was to ask what the hypothetical licence fee would be for copying and retaining the employer’s files without actually using them.

The decision should ring alarm bells for employers because it offers little deterrent to stop employees copying and retaining sensitive data. Any claim for damages will hinge on being able to show evidence of misuse.

This newsletter is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The newsletter represents our understanding of law and HM Revenue & Customs practice as at 2 May 2017.

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