During their employment, employees acquire experience,
confidential information, trade secrets and particular skills in
the affairs, practices, customer requirements and trade connections
of their employer.
An employer does not have any property in its staff. Rather, the
employer's interest is delineated by the employment contract.
Therefore an employer will need to make provision in the contract
to protect the goodwill of its business, that is, have a restraint
of trade covenant which operates by restricting either the use of
information or the future employment of an employee.
For a restraint covenant to be valid, courts often indicate that
the employer needs to have some proprietary right in the interest
sought to be restrained. Employers are, therefore, not entitled to
be protected against mere competition. Legitimate employer
interests which may be protected include the employer's trade
secrets and confidential information, customer connections, and
At common law, there exists an equitable duty not to misuse
confidential information. The effect of the duty is that
confidential trade secrets are subject to protection following
termination of employment, even where there is no express
contractual provision in relation to the information.
Courts have very broad powers to deal with a former employee who
has abused fiduciary obligations. These powers include:
An injunction preventing the former employee from abusing their
Equitable damages compensating the employer for loss the
employer has suffered, and
An account of profits that have been earned by the former
In the matter of APT Technology Pty Ltd v Aladesaye,
 FCA 966 (5 September 2014) the Federal Court granted an
interim injunction restraining a manager from approaching his
former employer's clients, despite the absence of an express
restraint of trade clause in his contract of employment, finding
that he might still be holding confidential information that would
give him an unfair advantage.
The employer terminated the employee after it discovered he had
set up a business in competition with it some six months'
earlier, and had used its confidential information in breach of his
The employer discovered that that the employee had forwarded
emails from his work account to his personal account and his new
business in the lead-up to the termination of his employment. The
emails contained confidential information belonging to APT,
including notes and records of confidential discussions between the
employer's general manager] and the employee about business
opportunities in Adelaide, template documents, client reports, and
information about the sale of the employer's office and
software previously used in its Adelaide operations.
The employee's contract expressly required him to devote his
whole "time, attention and skills" to his duties, and not
engage in any business activity in competition with the company. It
also said he could not use or disclose the company's
confidential information for any purpose other than his role. The
employee's position was significant as he was the
employer's main point of contact in Adelaide.
Once the employee had been dismissed the employer had
encountered difficulty in re-establishing connections with its
South Australian based clients.
The Federal Court was satisfied that there was a serious
question to be tried that the employee had breached his employment
contract and fiduciary duties owed to the employer as there was
he started to compete with the employer during his
he had disclosed for his own purposes the contents of the
employer's client databases, reports prepared by the employer
and other business documentation used by the employer
Although the employee's contract did not have an express
restraint of trade provision the Court granted the injunction on
the basis of the equitable duty not to misuse confidential
information and the "springboard principle" to prevent
the employee from using its confidential information to its
detriment and gaining a substantial advantage over the employer in
securing the future business of its existing and former clients
The Court is yet to decide the employer's claim for other
losses that may have occurred as a consequence of the
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.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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