IN BRIEF
Social media tools like LinkedIn can facilitate the portability of customer information from one employer to the next, putting the spotlight on traditional thinking around employee obligations in respect of confidential information. In this piece, Tim Hemingway looks at a recent UK decision which, amongst other things, had to deal with this very conundrum.
The relative novelty of social media as a business tool has so
far provided us with little case law guidance on how these new
media are, inadvertently or otherwise, potentially changing the
character of one of the classic species of business confidential
information, the client list, especially when employees decide to
move from one employer to another.
The recent England and Wales High Court decision in Whitmar
Publications Ltd v Gamage & Ors [2013] EWHC 1881 involved a
classic, though poorly executed, team move by some senior employees
of Whitmar Publications Ltd (Whitmar) to set up
their own, competing business, Earth Island Publishing Limited
(Earth Island).
Whilst the decision generally turned on the 'traditional'
principles of employee duties of good faith and confidence, it is
interesting because it demonstrates what a powerful tool
confidential information can be in circumstances where the relevant
employees' contracts of employment contained no relevant
restraints and, just to bring things into the 21st
century, it throws into the mix some social media in the form of
Whitmar's LinkedIn accounts and some questionable conduct by
Whitmar's employees.
THE FACTS
Whitmar had been in operation since 1988 and had a well
established printed publications business with a stable of
prominent titles. Three senior employees (a sales manager, a senior
editor and a production editor) all resigned on the same day in
late 2012. They were put on gardening leave and their employment
terminated with effect from late January 2013. Immediately
thereafter, they all started work at Earth Island, a competitor -
which they themselves had established, it turned out.
On discovering that the three had taken a number of significant
steps to set up the new venture whilst still employed by Whitmar
and had also attempted to solicit Whitmar staff and customers and
made unauthorised use of Whitmar's customer information and
circulation data, Whitmar commenced proceedings claiming (amongst
other things) breach of confidence and seeking restraint of any
further use of confidential information.
Pending commencement of those proceedings, Whitmar also sought
interlocutory relief (given the serious impact of their potential
continued use of its information and some of the behaviours Whitmar
had uncovered), including orders restraining further use of the
information and 'springboard' relief on the basis of the
unfair advantage which Whitmar claimed use of the information would
bring. The interlocutory judge found that Whitmar had a strong case
and would likely succeed at trial and granted the relief
sought.
THE EVIDENCE
The defendants claimed that they decided to resign and set up
elsewhere because of closure of a major title which they all worked
on. However, the evidence revealed that quite independently of that
closure decision (in which decision the sales manager was actually
involved!) and before they had resigned, they had already taken
some significant steps to set up their new business, including
making attempts to solicit Whitmar clients and using Whitmar's
corporate LinkedIn accounts to promote their new business,
including using customer contact information from those accounts to
invite Whitmar customers to the Earth Island launch! Significantly,
the senior editor (whose role also included management of the
company's LinkedIn accounts) also refused to disclose the user
names, password and other access information for those accounts
when requested, and continued to use them to promote the new
business.
In other words, it was clear that the defendants had misused
company information and had taken significant preparatory steps
whilst still employed by Whitmar, contrary to their duties of good
faith and confidence to their employer. The judge awarded the
relief even in the absence of any relevant restraints (such as
non-compete, non-solicit, non-poach or no-dealing restraints) in
their employment contracts (such as they were).
The decision is interesting in that it considers the fundamental
freedom that employees have to practice their livelihood and move
from one employer to another or even set up on their own account,
(including taking preparatory steps to do so), subject only to
employee duties of good faith and confidence, contractual
restraints and other duties and obligations at law (such as duties
of confidentiality and not infringing intellectual property
rights).
SIGNIFICANCE, PRACTICAL CONSIDERATIONS AND QUESTIONS
The decision is useful not only as a reminder of the just how
powerful duties in the employment context are as tools for the
protection of valuable business information, but also as a platform
for consideration of the impact that social media can have on those
duties.
Social media is now part of the workplace and does have an
impact on the employment relationship and ultimately on a
business' reputation – think about things like
consistency of profiling, revelation of customer information and
the semi-publicity of what could be unintended messages.
Now is the time to look at your employment contracts and policies
and your management of your business' and your employees'
social media accounts to make sure your business is properly
prepared to make best use of these media and to deal with movement
by social media savvy employees. This includes revisiting the way
non-compete/non-solicit type restraints are drafted and thinking
about how they will work in practice, for example to deal with
things like updates generated automatically by a medium like
LinkedIn which will notify a person's contacts when the person
updates their profile regarding a change of employment.
For further information please contact:
Richard Ottley, Partner
Phone: + 61 2 9233 5544
Email: rbo@swaab.com.au
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
