A recent case has highlighted the effectiveness of express confidentiality provisions in protecting sensitive business documents retained by departing employees, reports Innes Clark.
The change from office-based to remote working caused by the Covid-19 pandemic has resulted in an increased risk to employers of the misuse of confidential information. While the employee may have obtained the information and initially used it in good faith in the course of employment, problems can arise if they either move on to a competitor or pursue a claim against the employer. While all contracts of employment contain an implied duty of confidentiality, that duty is limited in its effect post termination, covering only ‘trade secrets’. For most, if not all, businesses, confidential information that needs protection will have a much wider scope than that which falls within the narrow definition of a trade secret.
There are practical IT-based solutions available to help protect confidential information, such as software that warns an employer when an individual has downloaded, printed out or emailed large volumes of documents. However, once an employment relationship has ended, it is the express terms of the contract of employment that will provide the strongest protection for confidential information. The recent case of Nissan Motor (GB) Ltd v Passi  has amply highlighted this point.
Background to the case
This case stemmed from the high-profile arrest and subsequent escape from Japan, in a large box, of Nissan’s ex-chairman, Carlos Ghosn. The company asked Mr Passi, its global legal counsel, to take part in an investigation into Mr Ghosn’s affairs. It subsequently dismissed Mr Passi for failing to follow lawful instructions and destroying the necessary trust and confidence in the employment relationship. Mr Passi, meanwhile, alleged that he had been victimised and that the real reason for his dismissal was because he had blown the whistle on what he saw as wider wrongdoing within Nissan.
At the time of his dismissal, Nissan had reminded Mr Passi of his obligation to deliver up all company property. He indicated that he believed he had delivered up everything but did ask for time to complete his searches to ensure that he had not missed anything. Despite reminders, he did not then return any other documents.
Mr Passi subsequently raised two claims in the employment tribunal. During the tribunal process, Nissan became aware that he had, in fact, retained in excess of 100 documents that it said constituted or contained confidential information and/or were subject to legal privilege.
High Court Proceedings
The company sought an interim injunction in the High Court requiring Mr Passi to return the documents and destroy any copies. In doing so, it relied on express provisions contained in the contract of employment that required him to return all confidential information on the termination of his employment. The contract also expressly prohibited him from using the information for anything other than Nissan's purposes.
Mr Passi admitted that he had taken the documents, that he had given them to his solicitors and that he had retained copies for himself. He argued that his purpose in doing so was to obtain legal advice. He also indicated he did not believe the company would have complied with its obligations under the employment tribunal proceedings to disclose the documents.
The High Court ordered Mr Passi to return all of the confidential information, to destroy any copies and to provide a witness statement explaining what use he had made of the information. The court found that he had no right of ownership of the documents and so had no right to possess them. It also saw no arguable case that he had any right to retain confidential documents in breach of the terms of the contract of employment. It did not matter that he was claiming to be a whistleblower or that he retained the documents for the purposes of his own legal advice. This order would not interfere with the employment tribunal’s processes given that there would be a disclosure process for relevant documents in the usual way. Mr Passi's concerns about his employer's compliance with the disclosure process did not justify him retaining the documents.
Using the contract to protect confidential information
Had Mr Passi’s contract of employment not contained the express provisions relied on before the High Court, the outcome for Nissan (which had stated that unquantifiable damage could be done if the documents came into the public domain) is likely to have been quite different. It is therefore essential that employers include a confidential information clause in their contracts, which should be properly drafted to meet the particular needs of the business. ‘Confidential information’ should be clearly defined and, particularly with more senior employees handling sensitive information, should, ideally, be tailored to the employee bearing in mind the particular work that they do. The use of the confidential information both during and after employment can be regulated and the clause can be updated as an employee's career progresses.
It is on termination of employment that well drafted confidentiality and post-termination obligations come into their own. The contract should require the employee to:
- refrain from using or disclosing any confidential information following termination of employment;
- return all company property, including documents wherever located and irrespective of whether they are in hard or soft copy; and
- irretrievably delete any information relating to the business stored electronically on devices that are in the employee's possession or under their control.
The employer may also require the employee to provide a signed statement confirming they have complied with these obligations and to provide reasonable evidence of the compliance. The provisions may also highlight that the employer will be entitled to seek damages or injunctive relief if the employee breaches the obligations.
Of course, it is not just employees who have access to confidential information. Employers can therefore include similar contractual provisions in non-disclosure agreements with others who have access, such as consultants.
Safeguards to put in place during employment
During employment, an employer can also protect against misuse of confidential information by:
- using technology to ensure confidential information is not easily accessible to those who are not entitled to use it and to keep records of who has accessed what;
- providing training to staff on appropriate use of confidential information, as well as on broader data security;
- putting clear policies in place, making staff aware of them and intermittently reminding them of their obligations; and
- marking documents as confidential to put any employees who do access such information on notice of its sensitive nature.
Monitoring employees’ use of IT systems may be justified in order to protect confidential information. However, employees should be made aware that this monitoring is happening and the extent of it.
Exit proceduresEmployers should also consider their exit procedures. They can use exit interviews to remind the employee of the terms of the contract, before following up with a lawyer's letter, if necessary.
Should the employee still make use of confidential information in breach of contract, the employer can seek an interim injunction (in England and Wales) or an interim interdict (the Scottish equivalent). An interim injunction or interim interdict can require the employee to return, delete or destroy documents containing confidential information and, as in Nissan, produce a statement setting out what they have used the confidential information for. Interim injunctions and interim interdicts can be obtained very quickly and the quality of the contractual terms that have allegedly been breached will contribute to the likelihood of success before the court.
An employer may also wish to remind the employee of their obligations under data protection legislation. Depending on the circumstances and the nature of the confidential information, the removal of information may result in the employee committing a criminal offence under s170 of the Data Protection Act 2018. This provides that a person must not ‘knowingly or recklessly’ and without the consent of a data controller:
- obtain or disclose personal data;
- procure the disclosure to another person of personal data; or
- retain personal data.
Legitimate ways for employees to obtain confidential documentation
Employees do have a number of ways of obtaining information from their employer, both before and during court or tribunal proceedings. These include subject access requests (where the information relates to the individual making the request) and freedom of information requests (which can only be made to public sector organisations).
Mr Passi, as with all claimants before an employment tribunal, would have the benefit of the tribunal disclosure procedures. The employment tribunal rules provide for disclosure orders to be made against parties to proceedings by the employment tribunal exercising its case management powers. The tribunals may also make orders for disclosure against third parties. It is a standard tribunal direction that all documents relevant to the claim that are in one party's possession should be disclosed to the other party. This includes the documents upon which the party relies, as well as documents that may adversely affect their case.
If a party believes relevant documents exist that the other party has not disclosed, they may ask initially for voluntary production of the documentation. If this is unsuccessful, they can make an application for the tribunal to order disclosure of the document. However, the party applying for the order will need to demonstrate why they believe the documents sought are disclosable. They must also show that the disclosure is in accordance with the ‘overriding objective’ (as set out in the employment tribunal rules). A party does not need to disclose ‘without prejudice’ or privileged correspondence.
Impact of the decision
This is not the first judgment to confirm that former employees are not entitled to retain documents in breach of contract where they believe they will need to rely on them in subsequent legal action. For example, see Brandeaux v Chadwick , in which the High Court found that an employee who had sent a ‘vast quantity’ of material stored on her computer, including confidential information, to her private e-mail address was in repudiatory breach of her contract. This was despite the employee, who was the head of research and business development, arguing that it was an implied term of her contract that she was entitled to use or disclose confidential information ‘as a matter of law and as a matter of reasonable necessity’. Part of her argument was that she was entitled to the information to protect her legal rights and to defend herself. As with Nissan, the High Court's view was that, in the event of a dispute, an employee should rely on the court's disclosure process. The court reached a similar conclusion in Tokio Marine Kiln Services v Yang  and Farnan v Sunderland Association Football Club  IRLR 185.
Nissan is, though, a timely reminder of the position when employers are dealing with new ways of working which may put confidential information at greater risk. It will give confidence to those who have put in place appropriate contractual restrictions on the retention and use of confidential information by ex-employees that their information is secure. This will be the case even when ex-employees have obtained information for the purposes of legal proceedings and they are concerned the employer will not comply with court or tribunal disclosure procedures.
The practical effect for Nissan in this case is that, even if it must subsequently produce some of the documentation as part of the tribunal proceedings, it has regained control of the process. It also has the time to consider fully what documentation it is proper to disclose.
Brandeaux v Chadwick  IRLR 224
Farnan v Sunderland Association Football Club  IRLR 185
Nissan Motor (GB) Ltd v Passi  EWHC 3642 (Ch)
Tokio Marine Kiln Services v Yang  EWHC 1948
This article originally featured in the April 2022 edition of the Employment Law Journal.
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