Act now to stop employees taking your confidential information

Do your current contracts provide your business with adequate protection for potential unauthorised storing of confidential information and can serious misconduct discovered after dismissal be relied upon?

Confidential information (eg client lists, pricing etc) is often ‘undervalued’ by a business until it is ‘too late’. Whilst businesses often take significant steps to protect such information from their competitors, a more likely source of risk is an existing employee, particularly where there is ongoing dispute with that employee or they are a ‘flight risk’.

We recommend that businesses mitigate their risks by using tailored contracts of employment to protect themselves during an employee’s employment and, if necessary, after employment ends.

Employers should consider reviewing their employment contracts to:

  • make sure confidential information clauses are sufficiently robust to protect the employer’s interests;
  • consider including express clauses preventing employees from sending confidential information to their personal email address or storing confidential information on their personal computer or devices without the employer’s consent;
  • make sure that the contracts clearly provide that breaches of confidentiality will amount to serious misconduct;
  • include powers for the employer to inspect and remove confidential information from the employee’s personal devices on termination; and
  • consider providing for recovery of payments in lieu of notice where evidence of serious misconduct at the time of termination is later discovered.

If your current contracts of employment do not contain any or all of these clauses, your business may be exposed to unnecessary risks.

The recent FWC case of Finemore v CMIB Insurance Services P/L demonstrates this very issue and how best to mitigate and, if necessary, defend against these matters. In this case, Ms Finemore had resigned and provided notice to CMIB.  CMIB however became aware that Ms Finemore had forwarded confidential information in the form of a client list to her personal computer using her personal email address at the time of her resignation.  CMIB was concerned that Ms Finemore intended to use the information to set up her own business or to provide to a future employer so that they could contact CMIB’s clients at renewal time and solicit their business. CMIB terminated the employment rather than allow her to work through her notice period.

After the termination, CMIB discovered that the employee had also stored confidential and sensitive documents on to a personal USB.  There was no need for Ms Finemore to download these files on to the USB to update them, which had been the excuse for emailing the client list.

The FWC accepted that the motive for downloading the files on to USB could only have been because she wanted to retain them after she left her employment and that she had the same intention in relation to the client list which she emailed to her personal account at the same time.

This case demonstrates FWC can, and will, take into account evidence of an employee’s misconduct that the employer:

  • was not aware of; and
  • did not rely on at the time of dismissal,

when determining whether or not the dismissal was unfair. However, it should be noted that any misconduct must:

  • have occurred prior to the dismissal;
  • be established by evidence to the FWC at the hearing of the unfair dismissal claim; and
  • be related to the conduct that resulted in the dismissal.

Of course, evidence of post termination misconduct may also be taken into account when the FWC is considering reinstatement.

If you would like to discuss how you can protect your business against potential breaches of confidential information or address post termination conduct, please contact:

Anne McCulloch
Special Counsel
T: (03) 6235 5195
E: amcculloch@pageseager.com.au

Published: 12 December 2017

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