Employers' Liability For Employees' Confidentiality Breaches

• Published date: 10 March 2021
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Employment Litigation/ Tribunals, Employee Rights/ Labour Relations, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Walker Morris
• Author: Nick McQueen, Rebecca Jackson and Charlotte Smith

Watch our recent webinar 'Stopping departing employees taking confidential information and competing' here.

Why is Travel Counsellors v Trailfinders of interest?

The recent Court of Appeal case of Travel Counsellors v Trailfinders¹ highlights the risk of employers becoming liable for their employees' misuse of confidential information.

The case clarifies the test that the courts will apply to determine whether a third party recipient of information (such as, here, an employer) owes a duty of confidentiality to the owner of that information.

Walker Morris' Commercial Dispute Resolution and Employment specialists Rebecca Jackson, Nick McQueen and Charlotte Smith explain this important decision and offer practical advice for employers.

What are the key takeaways for employers?

In this case two employees left the employ of Trailfinders and began to work for a competing travel company, Travel Counsellors. The employees took client names, contact details and other information from Trailfinders to Travel Counsellors in breach of confidence. Travel Counsellors then misused the information for the benefit of its business. The Court of Appeal found that Travel Counsellors was liable for the employees' misuse of confidential information.

The key takeaways for employers to note are:

• When a third party, such as an employer, receives information belonging to another, that party/employer may owe obligations of confidentiality to the owner in respect of that information. If the recipient misuses the information, they may be directly liable for breach of confidence.
• Where the person giving another's information to a third party (such as, in this scenario, an employee giving information belonging to its ex-employer to its new employer) does so in breach of any contractual or equitable duties of confidence, the third party/employer recipient can become vicariously liable for breach of confidence.
• The correct test to determine whether a third party recipient of information [vicariously] owes a duty of confidentiality to the owner of the information is whether the reasonable person in receipt of such information would make enquiries as to its confidentiality.
• If the reasonable person would make enquiries but the recipient in fact has not done so, then a duty of confidentiality on the part of the recipient will arise.
• In the case of primary liability for misuse of confidential information, then the 'reasonable person in receipt of information' test (as explained above) will...