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STOP EMPLOYEES STEALING CONFIDENTIAL INFORMATION
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A particular problem that is encountered by employers is dealing with employees and former employees and the knowledge they have acquired into the employer’s business affairs. The common law has long recognised restraint-of-trade clauses in contracts of employment that serve to reasonably inhibit the potential for a former employee to conduct a business in a way that might impinge upon the business of his former employees. A common problem now, particularly in high technology industries, is the protection of confidential information, trade secrets and the like acquired by an employee in the course of their employment and particularly when they choose to take up employment elsewhere. Both employers and employees alike should be mindful of the obligations that are imposed in the employment context which apply during the time of employment and sometimes after the service has ended. The duty of good faith and fidelity which may be implied in a contract of employment were discussed in Colour Control Centre Pty Ltd & CC Enterprises -v- Ricardo Ty, Deborah Rando and Photo Technica Pty Ltd. In this case Justice Santo in the Equity Division of the Supreme Court of NSW in 1995 found that notwithstanding the general right of employees to compete with their employer in their own time, directors or senior employees should not take up a position in their employer’s line of business without consent or at least full disclosure of the facts to the company with whom they are associated. The decision also made clear the fact that an employee may not retain any property or profit derived in the course of their former employment without approval. The Corporations Law also contains provisions which are analogous to the above principles. Another long-standing line of authority serves to remind us that employees generally owe fiduciary duties to their employer. In State Rail Authority of NSW -v- Earthline Constructions the Supreme Court of NSW, Chief Justice O’Keefe examined the question and found that employees are bound by a duty to act honestly in their service. This duty usually terminates when the employee ceases employment. An employee’s obligations to the treatment of information obtained in the course of employment usually arise from the implied obligations of good faith and fidelity as outlined above. An employee is free to use or divulge information of a trivial nature or which cannot be properly regarded as confidential and information which has been learned at work and has become part of their own skill or knowledge. However both during and after employment an employee is not at liberty to use or divulge for any purpose other than that for which they were employed, information which comprises the specific trade secrets of their employer. Michael Dailey |
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