Managing terminations: company property and confidential information
When managing a termination, there is often concern over the return of company property and the protection of confidential business information. These issues were considered in the case of Mark Richmond v Selecta Systems LTD.
Mr Richmond was employed by Selecta Systems Ltd as a sales director. Following a series of allegations regarding his conduct, it was decided to take steps to manage his departure. The parties agreed in principle that Mr Richmond would leave the business in return for a settlement package but before any final agreement was in place, Selecta became aware that Mr Richardson had been trying to solicit its clients and damage its business. In light of this, it withdrew from settlement negotiations and Mr Richardson was dismissed.
A dispute followed, part of which concerned the handling of the return of confidential business information held by Mr Richardson.
Confidential business information
Selecta was aware that Mr Richardson had hard copies of customer information, pricing lists and other confidential business information at his home address, and there was a belief that he also may have stored confidential information electronically using devices provided by the company and personal online accounts.
During the settlement negotiations Mr Richardson agreed to return the hard copy documentation and hand over his company mobile phone. He also agreed to provide Selecta with the passwords to his iPhone and Apple and AOL accounts to demonstrate that he was not holding any further confidential business information.
Selecta then used these passwords to access his online Apple and AOL accounts to check for sensitive information. Nothing was found other than customer contact information, which was held on iCloud. Selecta tried to delete the customer contact details, and in an effort to do so, changed Mr Richardson’s AOL and iCloud passwords and security settings. An attempt to reset them was unsuccessful and this resulted in Mr Richardson being locked out of his iTunes library and other online accounts.
Mr Richardson raised a claim against Selecta in respect of its interference with his online accounts. The court decided that in the circumstances Selecta was entitled to access Mr Richardson’s online accounts with the intention of deleting any confidential business information. However, it had been negligent in its actions, because the director who attempted to retrieve the information did not have the IT knowledge or skill to retrieve it without interfering with Mr Richardson’s passwords. As a result, Selecta was ordered to pay Mr Richardson compensation.
This case turns on the unusual facts of an employee surrendering a password and then being locked out of his personal accounts. However, more broadly, it highlights the importance of careful drafting at the onset of the employment relationship; and the need to address the return of company property and the protection of confidential information as part of a negotiated settlement or other termination.
Think about whether to impose the following types of restrictions on employees. These might be in the contract of employment or IT policy; and/or as a settlement agreement term, as appropriate. Remind an employee of any continuing obligations at the exit interview.
- Agreement that documents containing confidential information will remain the employer’s property and must be returned (and electronic copies deleted) on the termination of employment and at any other time on request.
- Obligation on the employee to return all company property (including laptops, tablets and mobile phones), on the termination of employment and at any other time when asked to do so.
- Right of the employer to access company property or equipment containing data relating to the employer at any time during employment, and on termination.
- Obligation on the employee to delete business contacts made during employment from their personal social networking sites; and/or provide the employer with access to those contacts before the termination date.
- Restrictions on when and to what extent the employee is permitted to use company provided property for personal reasons.
- Enforceable post-termination restrictions including, for example, obligations not to use or disclose confidential information; not to solicit customers or employees away from the business; and not to be engaged in any competing business.
Also, ensure that the return of company property and the protection of business interests are built into an employee’s departure (and thought about from the start of the process); and that anyone undertaking a search for confidential information has the necessary IT skills and experience to deal with it properly.
If you would like to discuss anything raised in this blog in more detail, please get in touch with your usual Brodies contact. Workbox subscribers will find useful guidance at the pages on confidential information; protecting intellectual property; and employee restrictions. Suggested clauses can also be found in the template contract of employment and settlement agreement.
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