Confidential Information & Competing Activity – Does Furlough Affect The Obligations Owed By An Employee?

No matter the sector that you operate in or the type of enterprise that you run, the chances are that your business creates and utilises valuable information on a daily basis.

Some of that information might be common knowledge, even posted on your website (e.g. prices, a product’s USP). In contrast, some of the information that you create and use – for example, chemical formulae, profit margins – will be commercially sensitive and so closely guarded.

In either case, your employees will have access to that information, to enable them to do their work.

Because of the value of that information, most employment contracts will include an obligation not to use or disclose confidential information or trade secrets belonging to the employer, other than in the proper discharge of their duties as an employee. Such an obligation can be expressly set out in the employment contract or implied by law, as a consequence of the nature of the employee/employer relationship.

Similarly, the employment contract will usually contain a prohibition on competing with the employer whilst an employee. Again, this can be an express obligation, or created automatically.

Does furlough affect these obligations?

Can an employee, worried about their job security, look to use their employer’s confidential information, ‘just in case’ they are made redundant?

Alternatively, can they take steps to set up a new venture or work with a new employer, where they would be competing with their current employer?

Furlough is a fiscal scheme; beyond requiring that the employee not undertake any work for the employer whilst participating in the scheme, the obligations of the employee to the employer are unaffected.

Consequently, the short answer is that, no, furlough does not affect the obligation not to compete nor the obligation of confidentiality owed by the employee.

However, employers should not become complacent. In the uncertainty of a pandemic, it is perhaps to be expected that employees may be looking at ways to try and safeguard their future, with or without their employer. Whilst furlough preserves the status quo in respect of any negative obligations owed to the employer (e.g. obligations not to do certain things – breach confidence, compete) it does not strengthen the employer’s position.

Because of this, an employer should be mindful of any alternative work that an employee undertakes whilst on furlough (it is not necessarily unlawful for an employee to undertake such work – just as an employee who is not furloughed may be permitted to have a second job in their spare time).

In all cases, the employer should consider whether the employee had access to confidential information that could perhaps be used to the benefit of their new venture/new employer and/or to the detriment of their existing employer. If there is the potential for such a benefit, legal advice should be taken as to whether the employee is in breach of the obligations owed and, if so, what can be done to prevent the employer from suffering any damage as a consequence.

Confidential Information Furlough

How can Nelsons help?

Emma Ward is a Partner in our Dispute Resolution team, specialising in contentious intellectual property matters.

If you have any queries regarding the subjects discussed in this article, please contact Emma or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.