Breach of Confidence - Case Study Example

The boundary between secrets which an employer may justifiably regard as belonging to him and elements of information which form part of the employees know-how is particularly difficult to draw” Introduction Employment secrets that employees come across during an employment engagement are protected from being disclosed or being used against the wish of the employer by terms of employment regulating commercial information. The duty of confidence involves the requirement by law for employees to observe concealment of employment secrets while under employment or after parting ways with the employer. Courts have to determine the nature of the business information and whether it qualifies as a trade secret or intellectual property at the disposal of the employer to carry out income earning activities1. It is from such a perspective that the complexity of determination of the boundary between justifiable and unjust application of employment secrets is highlighted. Such contestations arise from the reasonableness tag attached to common law interventions which employ various angles of view on a subject2. In this discourse, the case facts in Faccenda Chicken Ltd. v. Fowler and Others are applied to illustrate the principles of protection of confidence in a practical case of breach of confidence. In Hull (319), it is questionable how the Court of appeal arrived at its determination of the boundaries between the secret protection element of common law and the prima facie right that the law bestows on the employer. Such is among the contestations that this doctrine draws from its application in solving various civil cases decision making complexities. Case Facts: Faccenda Chicken Ltd. v. Fowler and Others The plaintiff conducted business at Brackley in Northampton involving chicken farming and selling them in form of chicken meat products. Upon slaughtering the chickens, they were delivered to the market in a chilled environment so that they are as fresh as possible. The chairman of the firm, Michael Faccenda acted as the managing director on behalf of the plaintiffs and in 1973, the first defendant by the name of Barry Fowler was employed as the new sales manager. Sudden changes were introduced by the defendant by way of applying itinerant refrigerated vehicles for supplying the chicken in a move that would eliminate wholesalers in a significant segment of the market (McCallum, 77). The first defendant was arrested on the 11th of December 1980 alongside another man, on allegations of chickens going missing in the distribution chain. This resulted in the first defendant’s resignation, court charges and subsequent acquittal and venturing in fresh chicken products distributed in refrigerated vehicles. Staffing attempts for the first defendant’s new business conducted in a newspaper saw eight of the plaintiff’s employees shifting employers for the new jobs (Diller and Stower, 184). Revelations pointed at the awareness of the availability of these positions by the eight employees long before the appearance of the advert. On the other hand, the Faccenda Chicken Limited was on the deterioration path since the departure of Mr. Fowler, which was aggravated by the departure of the eight. Charges were placed at the Chancery Division by the plaintiff. Judgement It was held that the employer had freedom to exercise his right to start a business and the burden was on the employer to demonstrate the breach of implied term of confidentiality protection. It was not possible for the company to provide evidence that implicated the former employee on breach of confidence by way of demonstrating that such information was in the public domain. Since the employment contract had been terminated, the scope of protection of confidence shrunk to exclude some elements of ordinary interpretation of the implied terms. Prima facie right of exploitation of employment experience and know how could not be confused to be a trade secret outside the employment. This distinction of secrets within an employment and the prima facie right to earn a living using personal commercial skills provides a complicated area of court decision making process. Confidence Protection under the Common Law In Faccenda Chicken Ltd. v. Fowler and Others, it was held that the plaintiffs’ argument was not actionable in the conditions and facts of the case. Breach of confidence was one of the obvious actionable causes that the plaintiff would heavily rely on against the first defendant as well among the rest of the employees. There are general contractual obligations that the employees at Faccenda Chicken Limited had to observe3. According to Wise (1) in Exchange Communications limited vs. William Masheder [2009] CSOH 135, five principles that guide the determination of the protection of the contractual parties’ rights include the following. Firstly, in terms of the obligations to be played by the contractual parties, the contract that binds them acts as the main determinant. Secondly, lack of express contractual terms does not translate to direct exemption of any party to obey their part of the contractual duties since implied terms are also enforceable. Thirdly, good faith and fidelity act as the most important contractual obligations that employees need to observe, whether expressly stated or not. Determination of the extent of this element is however dependent on the nature of the contract. Fourthly, the conduct of the employee after parting ways with the employer with respect to commercial information and secrets obtained during former employment must not amount to disclosure of high level confidentiality directly related to the employment. Other incidental information such as that acquired in the line of employment or that which was confidential during employment can be assessed to be waivered for the former employee. Finally, the facts of the case must be assessed to determine the magnitude of implied terms in the determination of whether certain manners of conduct can amount to a breach of contractual protection of confidence and trade restriction. Difficulties As mentioned above, difficult decisions are involved in determining the exact boundary lines between sustainable implied contractual terms of a contract and unjust protectionist approach by the employer. Despite the possibility of enforceability of exclusion clauses, it is difficult to include all the employment terms since some arise from a case basis. Some elements of the employment contract issues include the following highlighted areas. Good Faith during Employment It must be demonstrated that the employees play their part of the contract by devoting all his productivity for the benefit of the employer’s business. Failure to demonstrate this should only arise from side commitments such as applying the internal operations secrets to benefit personal business or a third party in such a business. Breaching this element is termed as infidelity. It is difficult to monitor employees’ conduct that closely and the likelihood of determining their conduct in future employment engagements. Using or Disclosing Confidential Information As observed above, it must be part of the contractual obligation that an employee does not disclose such important information as whose disclosure to third parties would occasion unfavourable business environment. The onus of this demonstration is the type of disclosure and the harm it would cause to the business, since quantification of such disclosure in financial terms is a complex process. Determining what is confidential and what appears to be confidential in express and implied terms is a tricky areas that makes things complicated for the plaintiff. The level of discretion to use confidential information is not clearly enumerable in express or implied terms. It becomes difficult to determine the nature of confidentiality in different types of business engagements (Aplin, Bently and Malynicz, 10). Further input towards establishment of such a business can be in form of intellectual transformation or even underground facilitation of another business, which would be hard to be applied as evidence for remedy by the plaintiff (Bently and Vaver, 178). Various levels of confidential information can be drawn out to assist in determining the magnitude of impact upon disclosure or use. Classes of Information In the judgment, Goulding J. said that there are about three classes of commercial information in terms of their magnitude to constitute to a material secret matter that must strictly follow the protection of confidence implied terms. Firstly there are certain types of information that appear trivial and easily accessible from public domain and that cannot amount to commercial secrets worthy of confidential protection by the employee. Secondly, express terms of the contract specify another type of particular secrets which must be observed at all times by the employee. This class of information however remains enforceable during the employment currency. Thirdly, an exclusively employer’s secrets class of information exists that bars employees to divulge or use such information during or after the termination of the employment contract (Neil, 5). Such a position was also held by Megarry J. in Coco v. A. N. Clark (Engineers) Ltd [1969] RPC 41 to the effect that the information in consideration must sustain the confidential threshold, communication must have occurred between the parties on the same topic and that the unauthorised use of the information must have occasioned losses (ipsofatoj.com, 1). Intellectual Property It was difficult for the plaintiff in Faccenda Chicken Ltd. v. Fowler and Others understand the application of the need for the employees to protect the business secrets and the their right to employ their knowledge and skills to earn a living. In light of the facts in the case, Faccenda Chicken Limited had different lines of operations until the arrival of the first defendant who introduced a different refrigerated vehicle supply system which soon became a productive and significant line of operation. In view of the conduct of the first defendant, it is clear that that area of specialization was part of his intellectual knowledge even before he joined Faccenda Chicken Limited. It becomes tricky for the plaintiff to demonstrate the breach of confidential information in terms of the sole business line under such circumstances. Unlawful Conspiracy Unlawful conspiracy which is relied upon for the formation of a decision regarding fidelity could be difficult to demonstrate, bearing in mind that the terms of employment at one employer could be used as a reason for leaving or joining employment. In light of contractual obligations, the contract must be clear on the time that contractual parties are tied down by a contract. If it is an open contract in terms of duration of time that the parties are held down, it is difficult to demonstrate the contractual obligation that the employee as staying in the employment. Customers In determining whether the first defendant breached confidence in terms of taking the plaintiff’s customer information, it was necessary for the judge to provide his list of compendiously important sales elements for determination of justice in the action by the first defendant after parting ways with Faccenda Chickens Limited. Such customer information as would assist in determining if the defendant acted against proper conduct regarding the former employer’s customers includes; names of the customers alongside their addresses, supply routes used by the plaintiff’s supply vehicles, customer orders in terms of quality as well as quantity, specific days in the week when customers’ orders were placed and deliveries made as well as the pricing strategy (Tolley’s Employment Law Service, 4). In terms of these elements, it must be demonstrated that the first respondent’s operations translated to application of such information without the consent of the plaintiff with every detail regarding the customer. Works Cited “Michael Douglas vs. Hello Ltd.” 2005. Web. http://www.ipsofactoj.com/international/2006/Part07/int2006%2807%29-009.htm (accessed 26 July 2011) “Tolley’s Employment Law Service, Restraint of Trade: Introduction,” (n.d). Web. http://www.saradawnbridal.co.uk/gary/Tolley%27s_Employment_Law_Service2007-02-03_00-08%5B1.DOC (accessed, 25 July 2011) Aplin Tanya, Bently Lionel & Malynicz Simon Gurry on breach of confidence: the protection of confidential information. Oxford, UK: Oxford University Press, 2011. Print Bently Lionel, Vaver, D. Intellectual property law in the new millennium: essays in honour of William R. Cornish. Cambridge, UK: Cambridge University Press, 2004. Print Diller, Christopher D. & Stower, Harriet B. Uncle Tom’s cabin, or life among lowly. Hull John, ‘Faccenda Chicken Ltd v Fowler: fowl play in the Court of Appeal’ E.I.P.R. 1986, 8.10(1986):319-322 McCallum, Ron, McCallum’s top workplace relations cases. Sydney, Australia: CCH Australia Limited, 2008. Print Neil, L. J. “Faccenda Chicken Ltd. v. Fowler and Others, Fowler v. Faccenda Chicken Ltd.,” (n.d). Web. http://oxcheps.new.ox.ac.uk/new/casebook/cases/Cases%20Chapter%2017/Faccenda%20Chicken%20Ltd%20v%20Fowler.doc (accessed, 25 July 2011) Wise, Morag “Confidentiality” 2009. Web. http://www.scotcourts.gov.uk/opinions/2009CSOH135.html (accessed, 25 July 2011) Read More