Vestergaard v Bestnet: Breach of confidence requires knowledge

21 June 2013

All employees have a legal obligation to keep their employer's confidential information secret. In respect of "trade secrets", this duty continues after termination of employment. As confirmed by the Supreme Court, an employee cannot be in breach of that duty unless they actually knew or were told that the information in question was confidential.

In Vestergaard v Bestnet a group of employees resigned from the ex-employer to set up a competing business and they developed a new product by misusing their former employer’s trade secrets. One of the employees who was the main Director of the competing company, had been employed in sales and marketing by Vestergaard and had never had access to, or knowledge of, the relevant trade secrets. In addition, she was unaware that the new product had been developed unlawfully.

The Court held that unless she knew, or ought to have known, that the actual recipients of the information were misusing it, she could not be held liable for breach of confidence.

Points to note –

• While their employment subsists, all employees have a legal obligation of confidentiality to their employer, whether it is written into their contract or not.

• Even after termination, employees still have a duty to not to misuse ‘highly confidential information’ i.e. trade secrets.

• Employers should always include an express confidentiality provision in employment contracts. To give such a clause effect, employers should make clear to employees what information they consider to be a trade secret. To avoid the employers enforcement problems in this case and for further protection of the business, employers should include post-termination non-compete restrictions in the contracts of senior sales personnel.