It is not uncommon – employee moves to a competitor and a dispute arises between the ex-employer and the ex-employee about confidential information. In such a scenario, the ex-employer will often also threaten legal action against the new employer. This can be an effective tactic because generally no business wants to be embroiled in what is expensive litigation. Furthermore, the new employer will usually have deeper pockets than the former employee if the ex-employer can establish loss. In the case of Trailfinders Ltd v Travel Counsellors Ltd & others, Trailfinders alleged that its former employees took confidential information and gave it to their new employer, Travel Counsellors Ltd (TCL). It also alleged breach of confidence against TCL for allegedly receiving that confidential information and allowing the employees to use that confidential information for their and TCL's benefit.

The decision from the Court of Appeal should serve as a warning to businesses that they cannot 'turn a blind eye' to the possibility that information brought by its new employees could be too good to be true and may be confidential to the ex-employer. If the new employer fails to make enquiries about information that it receives and uses, in circumstances where a reasonable person may conclude that the information, or some of it, may be confidential, it may find itself on the receiving end of an expensive claim for breach of confidence.

The chronology of events in this case:

1. The ex-employees had a list of clients with whom they dealt and did business at Trailfinders;
2. In joining TCL new recruits were expected and encouraged to bring their own customer contacts;
3. TCL did not warn new recruits about the risk of breach of confidence in doing so;
4. The ex-employees duly took details of customers from their soon to be ex-employer's data bases and brought their customer lists to TCL;
5. These contacts were added to TCL's database without any questions or enquiries.

The ex-employees were found to be in breach of their implied duty of confidence to Trailfinders. TCL was also found to be in breach of a duty of confidence owed to Trailfinders. The key finding was that where a reasonable person would have reason to believe that information it receives may have been provided in breach of an obligation of confidentiality, it should generally make further enquiries before using that information. If instead it turns a blind eye and fails to enquire (as was the case here), it risks being liable for breaching that confidentiality. 

The concern for employers is that this decision places them under a greater burden, when they receive information, to make enquiries as to the nature and origin of that information. What practical points can we take from this decision?

Some practical tips for the current employer:

1. Do a risk assessment and identify your key players who could damage the business if they left tomorrow. 
2. Make sure your key players have robust and enforceable restrictions in place relating to confidential information, customers, employees and in some cases suppliers.
3. Include an obligation to provide a copy of the restrictions to any new employer. 
4. Remind exiting employees of their contractual obligations when notice is served by either party. 
5. Make use of garden leave to protect the business during notice.
6. If the individual has to work all or part of their notice period, monitor their use of your systems to ensure confidential information, customer and employee relationships are protected.
7. Act quickly if you suspect any breach of confidential information or post termination restrictions.
8. Consider whether any appropriate action should extend to the new employer. 

Some practical tips for the new employer:

1. As an employer, do not turn a blind eye. Make enquiries with the new recruit.
2. If you expect employees to generate their own business, where do their contacts and business come from?
3. If circumstances were reversed, would you regard the information you receive as confidential? If the answer to that question is yes, then it is likely to be confidential to the other business and therefore put your business at potentially significant risk if you use it. 
4. Ask your newcomers if they have any post-termination restrictions, if the answer is yes, get a copy so that you can do risk assessment. 
5. Consider including a contractual warranty that the individual is not in breach of any restrictions or duties of confidentiality in accepting the position with you and will continue to comply with any such ongoing obligations. 
6. If the new employee is providing the business with information and insights, does it go beyond skills and knowhow built up over the course of their career? Would you expect someone to be able to carry this information in their heads? If not, it is possible, indeed likely, that the individual has copied and/or taken at least some of the information – make enquiries.
7. Remind new employees that they may owe a duty of confidentiality to their ex-employer and tell them not to pass on or use any such confidential information in their role with you. 
8. Educate your management team as to the potential risk to the business of breach of such obligations to past employers.

The government has opened a consultation on potential reform for non-compete clauses. They are seeking views on the following options:

• Mandatory compensation for the duration of the non-compete provision;
• Requiring the employer to disclose the terms of non-competes before employment begins; and
• A ban on non-competes. 

It will be interesting to see the progress in this area, particularly in the wake of the pandemic. Whilst a ban is highly unlikely, non-competes remain the hardest restriction to enforce, so it is important that employers do not rely solely on them to protect their businesses. Enforcement of confidentiality may therefore become ever more crucial.