If your employees build up LinkedIn connections with clients and then leave to work for a competitor, do those networks count as trade secrets?
Gone are the days of employees sneaking client lists out of the building to impress a new employer – now, they can simply take their client connections with them on their LinkedIn profiles.
Do the client relationships workers build up on LinkedIn count as the company’s trade secrets?
According to a Lexology article by Chris McLeod and James Neil of Clayton Utz, there are measures employers can put in place to prevent their contacts walking out with employees.
Steps include making sure employment contracts prohibit workers from contacting the company’s clients for an appropriate amount of time after they leave and having a social media policy that deals with such potential risks.
“If you become suspicious that an employee (or former employee) is using their social media connections for surreptitious purposes, you should write to the relevant social media provider and request that they preserve the data relating to the employee's account so it can be analysed at a later date, if required,” said the article.
It referenced two international court cases which tested the theory of LinkedIn contacts as trade secrets, which had different outcomes.
The United States District Court held that LinkedIn connections were not trade secrets because the information is “either generally known in the wider business community or capable of being easily derived from public information”.
However, a UK court took a different view when a recruitment firm employee used information from his employer’s database to connect with the company’s clients, arguing that once his invitations were accepted, the information was no longer confidential because it was accessible to his network.
The court disagreed, finding that even if the information was no longer confidential, it could be used to benefit a new employer.
“You need to think twice before overtly encouraging your employees to use social media for employment-related purposes. If you do decide to promote (or even permit) extensive work-related use of social media by your employees, your need to be aware of the risks, and how to prevent them from materialising,” said the article.
DLA Phillips Fox partner John Hannah told the Sunday Star-Times that the firm was starting to see New Zealand employers take an interest in the issue and he expected to see an increasing number of disagreements over social networks between bosses and employees.
“The organisations that have a particular interest are those that rely on sales networks, relationships and knowing their clients’ business,” he said.
Would you encourage employees to connect with company clients on their LinkedIn profiles?
Do the client relationships workers build up on LinkedIn count as the company’s trade secrets?
According to a Lexology article by Chris McLeod and James Neil of Clayton Utz, there are measures employers can put in place to prevent their contacts walking out with employees.
Steps include making sure employment contracts prohibit workers from contacting the company’s clients for an appropriate amount of time after they leave and having a social media policy that deals with such potential risks.
“If you become suspicious that an employee (or former employee) is using their social media connections for surreptitious purposes, you should write to the relevant social media provider and request that they preserve the data relating to the employee's account so it can be analysed at a later date, if required,” said the article.
It referenced two international court cases which tested the theory of LinkedIn contacts as trade secrets, which had different outcomes.
The United States District Court held that LinkedIn connections were not trade secrets because the information is “either generally known in the wider business community or capable of being easily derived from public information”.
However, a UK court took a different view when a recruitment firm employee used information from his employer’s database to connect with the company’s clients, arguing that once his invitations were accepted, the information was no longer confidential because it was accessible to his network.
The court disagreed, finding that even if the information was no longer confidential, it could be used to benefit a new employer.
“You need to think twice before overtly encouraging your employees to use social media for employment-related purposes. If you do decide to promote (or even permit) extensive work-related use of social media by your employees, your need to be aware of the risks, and how to prevent them from materialising,” said the article.
DLA Phillips Fox partner John Hannah told the Sunday Star-Times that the firm was starting to see New Zealand employers take an interest in the issue and he expected to see an increasing number of disagreements over social networks between bosses and employees.
“The organisations that have a particular interest are those that rely on sales networks, relationships and knowing their clients’ business,” he said.
Would you encourage employees to connect with company clients on their LinkedIn profiles?
