​LinkedIn connections: Trade secret or a good idea?

Do employers have rights in relation to contacts built up on the popular corporate social media site?

linkedin job recruiters
Credit: Thinkstock

Many business executives have LinkedIn profiles. How actively they participate and use the site’s features is very much driven by the individual and the value proposition the service provides for them.

Some treat it more like a ‘professional’ Facebook, whereas others see it is a valuable source of business contacts, industry information, work and sales opportunities, and other professional benefits.

2014 statistics indicate there were then some 50 million LinkedIn members throughout Asia Pacific, and more than 5 million were from Australia.

Those are pretty serious sorts of numbers, and the potential for inter-connectivity is naturally huge. Anyone who spends time developing contacts and their network will appreciate the potential worth both for employers and employees.

However, before rushing off to check if someone has viewed your profile in the last half hour, you might pause to consider some of the recent employment-related legal cases involving LinkedIn accounts.

Note that these cases are not concerned with LinkedIn employees nor do they relate in any way to any the company’s operating entities.

In 2013, the case of Whitmar Publications Ltd v Gamage came before the UK High Court. The essential facts revolved around employees of Whitmar setting up a competitive business to that of their employer, whilst still employed by Whitmar.

The employees solicited existing clients of Whitmar, removed 450 business cards of Whitmar clients, and they used Whitmar’s LinkedIn groups to promote their own business. Once they had left Whitmar, the former employees refused to provide the login details for this LinkedIn account.

In the absence of written employment contracts, Whitmar relied on the implied duty of good faith and fidelity, which Whitmar asserted the former employees had breached, by setting up the rival business whilst still employed.

The High Court found that Whitmar was likely to succeed at trial, and granted injunctions which prevented the former employees from entering into contracts with any of the parties identified on the business cards, and which required the former employees to return control and access to the LinkedIn account back to Whitmar.

In a 2014 case before the US District Court of California, a former employee sought summary dismissal of a claim against him by his former employer.

During his employment, the employee had signed an employment contract and separate confidentiality agreement, recognising his employer’s entitlement to certain “proprietary information”.

The employee was required to develop contacts, and recorded them in an electronic contacts list maintained at the office of his employer. Many of these contacts were also made through connections in his personal LinkedIn account.

Read more:The legal ramifications of a cyber attack

Before leaving the employment, he emailed the electronic contact list to his private email account. After he left this employment, the former employer commenced proceedings seeking to restrain the former employee from using these contacts, both the list and the LinkedIn connections, alleging they were trade secrets. The court refused the summary dismissal, and in particular ruled that the LinkedIn connections ‘may’ be found to be trade secrets.

There is a current Australian case Naiman Clarke P/L v Tuccia pending before the Supreme Court of NSW. In that case, the recruitment company Naiman Clarke alleges that a former employee appropriated candidate names form the company’s database and connected with them through LinkedIn to create a candidate base for her new role with a rival company.

The former employee had signed an employment contract which included an obligation to protect the confidential information of Naiman Clarke.

Clearly each of these cases has differentiating features, not least that they pertain to different countries and therefore different laws. There are also common features relating to confidentiality undertakings, and the post-employment use of data and information that was valuable to the former employer.

Even though the cases are in three separate international jurisdictions, Australian courts take judicial notice of how foreign courts are addressing new issues. That notice is necessarily tempered by recognition of the differences in laws to be applied. So what do these cases tell us?

There is no doubt that in the realm of social media, sites such as LinkedIn have arguably created a quasi-professional social environment.

Read more:Facebook hires new A/NZ chief

If you do a Google search on ‘sites like LinkedIn’, it produces an interesting variety of results. It is a matter of opinion as to what extent, if any, web sites are or are not similar – they might offer some similar features, outcomes and ways of treating a common scenario.

The point is rather that a business/professionally-focused personal connection environment is attractive and useful to many professional people and organisations, and the use of such sites appears likely to grow.

With such growth will inevitably come questions as to who owns valuable connection data, and who is entitled to control and/or use it.

In the absence of any definitive court decision or judgment on whether LinkedIn (or similar) connection data is ‘confidential information’ or a ‘trade secret’, or some other form of property capable of ownership and/or protection, there are several guidelines we can extrapolate from these cases.

LinkedIn facilitates organisations as well as individuals, as participants. I suggest there is a significant difference between connections developed through an organisation’s LinkedIn presence, and those developed by an individual.

In my view, there is also a difference between establishing connections purely for business purposes, and establishing those that are in fact based on a pre-existing personal contact that may, for example, be a personal friendship. There is potential for all sorts of permutations of connection factors.

Read more:Credentials the new ‘currency for careers’

There are also certain businesses and activities that will have a potentially more direct and observable value in professional contacts, and therefore arguably be more prone to conflicts over who owns or is entitled to ‘use’ them.

The concept of using a contact will also require clarification. For example, will merely making someone a connection, and nothing more, be a basis for complaint? Does there need to be a definable benefit that can be shown to exist or flow through the connection?

Not surprisingly, it will be some while before we start to see some answers to these and related questions. In the meantime, there are steps that employers and employees can take to minimise the potential for conflict.

  • Employment contracts should cover social media generally, and in particular should address web-based professional contact sites, how they are to be used, and what entitlements and rights cover the connections and their data.
  • Where appropriate, this may include handing over the user name and password to the employer on cessation of employment, but this will be a difficult issue where the individual is the member.
  • If appropriate, such professional electronic connections should be expressly identified as proprietary and/or confidential information (in an employment contract and/or confidentiality agreement).
  • A distinction may need to be drawn between the employer’s membership, and that of the individual.
  • In addition to contracts, all employers should include specific reference to professional contact sites in their internal policies and state clearly what its policies are concerning membership and control, use and ownership of connections.

Guy Betar is a corporate/IT lawyer with more than 20 years’ experience. He is currently special counsel at Salvos Legal and can be contacted by email at guy.betar@salvoslegal.com.au.

This story, "​LinkedIn connections: Trade secret or a good idea?" was originally published by CIO Australia.

To comment on this article and other CSO content, visit our Facebook page or our Twitter stream.
Insider: Hacking the elections: myths and realities
Notice to our Readers
We're now using social media to take your comments and feedback. Learn more about this here.