IN this month’s CFJ, we run an exclusive interview with a midlands flooring contractor which found itself in trouble when some of its staff members conspired to used its data to set up a rival business. 

This nightmare scenario, which business owners can be forgiven for not thinking about until it actually happens to them, could have had a devastating impact on the livelihoods of the contractors involved not to mention their other employees and the longevity of their business.  

One of the owners told CFJ: ‘One Thursday in February we were told by a fitter that three of the office staff had setup a company and that it was going to go live the week after.’ The owners were shocked – they had had no idea trouble was brewing. 

When the company acted by retrieving the employees’ computers and phones they found ‘hundreds… thousands of messages, going back months, on what they were doing and how they were going to do it’. 

The main instigator was someone the company had hired last summer and who’d already lost the company money on a contract. Internal management conflict led to the individual staying with the firm – and that’s when the owners suspect the plan was hatched to setup in competition with stolen data. It transpires that one of the three conspirators had approached a fitter and told him three, possibly four, internal office staff were about to leave for another company that was being set up. On further digging, the fitter then spoke to the owner’s business partner. 

Fortunately, the firm was undertaking a job for a law firm. Getting on well with the law firm owner proved to be a turning point for the contractor. He says that armed with a little advice he established that ‘two members of staff had been with the company under two years so we could get rid of them on the spot. But one had more than two years’ service so protocol for gross misconduct had to be followed’. That individual was put on gardening leave before dismissal later on. 

Apart from employee contracts being updated the firm has sought to lock down its computer systems ‘which,’ he says, ‘have even more restrictions on it in terms of what people can see’.  

As CFJ reveals, it appears the former employees had been stealing information to use against the company. They’d bought hard drives and took data while in the office – and from external locations too; they spent weekends downloading information. ‘They,’ says the owner, ‘wanted us to fail. They thought we would go quickly and that they would take all our work offers and would become millionaires’. 

CFJ writer, Adam Bernstein, points out that the takeaway from this story is that while it’s impossible to stop malevolent events from occurring, having good contracts in place and restricting information so it’s accessible on a need-to-know basis will minimise the risk. As the midlands owner outlines, ‘the level of security within the business is much more precise that it used to be – if someone wants to take information, they won’t be able to get much’. 

In our Thought Leadership section, we explain that data held by firms is central to their continued existence and needs protection from those that would wish to abuse it. But while there are countless malevolent external actors, hackers and fraudsters for example, not all firms properly protect information from abuse by employees. 

We explain how there are three general categories of confidential information – general skill and knowledge; confidential information; and trade secrets that includes commercially valuable secrets that give an owner a competitive advantage. 

Mark Stevens, senior associate at VWV, says information can generally be said to be confidential if it ‘has the necessary quality of confidence; has been imparted in circumstances where the recipient knows or ought to have known of the confidentiality attached to it; and there has been unauthorised use or disclosure of it to the detriment of the rights holder’. 

He also points to The Trade Secrets (Enforcement, etc.) Regulations 2018 (SI 2018/597), regulation 2, which similarly defines the matter but in legal terms. 

Of course, having a definition is one thing, but how does it play out in an employment context? 

From a legal perspective, Aron Pope, a partner in City law firm, Fox Williams says that ‘during employment, employees have an implied duty to keep all information confidential. However, once they’ve left, the picture is different, and employers will be more at risk’.  

He says that although employees are still subject to an implied duty to keep trade secrets confidential, ‘without specific and robust post-termination confidentiality terms in the employment contract wider valuable information is at risk of being passed to a competitor’. 

But there are practical and preventative steps employers can take to protect confidential information. For Pope, this means identifying what’s important, protecting it, training staff on the importance of protection, and monitoring for breaches. 

For the full story, read September CFJ