Going Beyond What Is Fair And Legal
Restraint of trade cases usually revolve around whether the clause is appropriate to protect a legitimate interest of the employer, and no broader in duration and scope than is necessary to protect that legitimate interest.
However, well known stock brokering firm Ord Minnett recently fell foul of restraints in a different way. It used the confidential information of Wilson HTM, an employer of some individuals who were angling for jobs at Ord Minnett, to try and 'lure away' even more of Wilson HTM's employees.
Background to the case
During discussions with several disenchanted Wilson employees, Ord Minnett asked them to provide information regarding the revenue earned by other employees of Wilson, to assist Ord Minnett in arranging attractive packages to lure more of Wilson's employees to transfer. The information included commission statement sheets of other employees of Wilson. Ord Minnett ended up with precise revenue figures for 18 individuals from the sheets, which also disclosed the identity of Wilson employees that Ord Minnett might try to poach to achieve a "team transfer".
The Wilson employment contracts included provisions about the confidentiality of both the employee's remuneration, and information regarding the business affairs of Wilson. Justice Bergin in the Supreme Court found that "business affairs" was broad enough to cover information regarding revenue earned by employees and the reference to keeping remuneration confidential also indicated the confidentiality of revenue, because remuneration was closely tied to revenue.
Ord Minnett argued that it was quintessentially anti-competitive to enforce provisions which lessened the opportunity of the Wilson employees to obtain better employment. However, Wilson argued that it had a legitimate commercial interest to maintain a stable workforce, and was able to protect that interest by restricting use of confidential information. Justice Bergin agreed.
The Court held that there was a difference between an employee talking to a possible new employer about their own personal revenue and remuneration, at a general level, and perhaps disclosing "some numbers" on the one hand, and on the other, providing the prospective employer with a raft of information about the remuneration and revenue of Wilson employees generally.
Justice Bergin held that the fact that an individual employee might breach contractual obligations by providing specific detail of their personal remuneration or revenue did not mean that information, and certainly information relating to others, ceased to be confidential information. He went on to say that Wilson had a legitimate commercial interest in protecting itself from an "exodus of its workforce by reason of competitors stealing a march on it by use of its confidential information. The case is not about the commercial morality of competitors luring employees away from their employment. The issue is whether the defendant wrongfully obtained the plaintiffs' confidential information to set the lure".
Having more information gave Ord Minnett much greater capacity to tailor offers to individual employees and try to assemble a team. In fact, Ord Minnett was found to be liable for damages for inducing a breach of contract, because it knew or should have known that the Wilson employees were employed under employment contracts including obligations of loyalty to Wilson while in its employment and to protect confidential information of just this sort. Ord Minnett was therefore ordered to pay damages of more than $170,000.
What should employers do?
This case demonstrates that well-drafted provisions in an employment contract can, in the right circumstances, effectively protect a business from the illegitimate conduct of employees and competitors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.