Hold the Line! - Restraints & Employment Contracts
Workplace Law's Managing Director, Athena Koelmeyer, will guide you through the legal minefield of post-employment restraints.
Read more...SAI Global Property Division Pty Ltd v Johnstone [2016] FCA 1333
Employees have ready access to their employer’s confidential information during the course of their employment. For an employee, this information is important in order to carry out their duties but for an exiting employee, they may be tempted to improperly retain confidential information believing it will be useful in their new position.
In our blog earlier this year – “Going...Going...Gone – Terminated Employees and Confidential Information” we highlighted the basic measures that employers can put in place to protect their confidential information. Some measures that we highlighted were for an employer to analyse an exiting employee’s computer in order to identify whether a copy of company confidential information was made and if so, then to take the appropriate action in the courts.
These measures were taken by SAI Global Property Division Pty Ltd (SAI) after its Business Development Manager (the Employee) tendered his resignation and advised that he was going to be joining a competitor in October 2015. Following the announcement, the Employee was reminded of his obligations regarding confidential information and placed on gardening leave for his two week notice period.
SAI was rightly concerned about the Employee’s announcement to join a competitor and arranged for his laptop computer to be forensically examined. This forensic examination found that three days before tendering his resignation, the Employee saved two computer files onto a USB which contained SAI’s confidential and customer information. It was also discovered that the Employee had commenced employment with the new employer whilst he was meant to be on gardening leave.
SAI subsequently commenced proceedings in the Federal Court of Australia and was successful in seeking orders which restrained the Employee from deleting or otherwise destroying SAI’s confidential information and required him to “deliver up” to the Court the confidential information, including any external storage device and computer.
The Employee admitted that he copied the confidential information without permission of SAI and that he knew that it was wrong to do so. The Court also found that:
- The Employee copied the documents onto his new employer’s laptop;
- The Employee created a new spreadsheet in his new employment which contained information from the confidential files;
- The Employee used the information to compare customer information;
- The new employer did not know about the Employee’s actions.
The Court held that by copying and accessing the confidential documents, the Employee:
- Breached the express and implied terms of his contract;
- Infringed SAI’s copyright; and
- Breached the duties owed under Corporations Act 2001 (Cth).
The Court made Orders which restrained the Employee from using any of SAI’s confidential information and for the Employee to pay SAI $9,231.00 in damages and $196,416.54 for its legal costs.
In this circumstance, SAI had in place the right protections and took the appropriate measures to seek to protect its confidential information.
It is important that employers put into place measures in order to protect their confidential information and to prevent employees from copying, removing or disclosing confidential information. Such measures include:
- A properly drafted contract which clearly defines confidential information and states that the employee can not disclose or use any of its confidential information without consent;
- Remind an exiting employee of their obligations regarding confidential information;
- If required, place the exiting employee on gardening leave (where they are to remain away from the workplace and computer systems);
- If possible or necessary, examine the exiting employee’s emails and / or analyse their hard drive to determine whether any confidential information was copied, created or emailed; and
- Immediately seek the assistance of the courts where confidential information has been taken.
Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.
