Protect confidential information starting from employment contract

The non-compete clause (also known as post-termination restriction) in the employment contract is necessary to protect employers' legitimate business interest reasonably. It also set out groundings for later enforcement to protect confidential information from leaking when your former employer job-hops to your business competitor.

Here is a case, where the employer was driven to the court, when the entire workforce (except for the managing director) walked out with the company's trade secret and joined a competitor company.

The owner (mother company) of a zipper manufacturer (the employer) in Hong Kong found out about the defection when a customer forwarded an email sent by one of the former employees, advising clients that the employer's entire sales and customer service team had joined the competitor company (the competitor).

The employer applied to the court for springboard injunctions against the competitor and eight of the former employees to prevent them from dealing with any of their customers for a period of six months. The employer also sought orders for its former employees to deliver up any confidential information they might have taken.

In the Court of First Instance, the judge found that some of the employees had been secretly planning the defection to the competitor up to six months in advance. They had each spent some time working on projects for the competitor while still officially employed by the employer. In particular, this had happened during their notice periods. They had also been engaged in copying the employer's accounts, customer details and other confidential information such as codes, spreadsheets, production orders, pricing data and shipment details.

The judge found that the defendants had taken improper use of the confidential information, which gave the competitor an unlawful and unfair head start via a series of action breaching the code of fidelity under employment contract and the common law. The outcome was that he granted springboard relief and restrained the employees for a period of six months. Those involved were also ordered to deliver up any confidential information rightly belonging to the employer.

Disclaimer: This article serves as the provision of general information and reference only. It is not intended to be served or interpreted as any legal advice in any occasion, at any cost. Please seek professional help if you have any relevant legal issue.

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