Australia: The cuckoo in the nest: how to protect against employee information theft

At the end of the day, the impact of not taking steps to protect confidential company information might prove more costly than you think.

Employers often face the predicament of how to best protect confidential company information. The concerning reality is that all too often employers focus their efforts on protecting their information from outsiders while valuable trade secrets and sensitive information are stolen from within by their own employees.

However there are many practical and legal steps that an employer can take to minimise their risk and proactively protect this valuable corporate information.

Pre-employment: secure the contract

One of the best ways that an employer can secure company information from employee theft is by having a robust employment contract that prohibits its misuse. At a minimum, employers should ensure that their employment contracts contain clauses in relation to confidentiality, intellectual property, restraint of trade and gardening leave.

Confidentiality clause

A confidentiality clause should contain an express prohibition on the use of confidential information, both during and after employment. The clause itself should clearly define what information is confidential so that employees are in no doubt as to what is and what isn't confidential information (and what will therefore be protected).

Employers should also themselves act consistently in this regard and actually treat the information as confidential within day-to-day operations.

Employers can also minimise the risk of departing employees stealing company information for use in their next job by expressly extending the prohibition on use of confidential information to include the period after they leave.

Intellectual property clause

An intellectual property clause seeks to ensure that the company retains possession of the intellectual property of all documents and work produced by employees during their employment. Employers should ensure that an intellectual property clause is included in every employee's contract to avoid potential disputes as to ownership of work created during the course of employment.

Restraint of trade clause

A well drafted restraint of trade clause can restrain a former employee from certain conduct, such as joining a competitor, as well as protecting against the misuse of confidential information, for a certain period once they have ended employment with a company.

However, care should be taken with the drafting as a court may declare them to be unenforceable if it goes beyond what is "reasonably necessary" to protect the employer's "legitimate business interests". Restraint of trade provisions can protect an employer's genuine trade secrets, confidential information, customer connections and staff relationships.

However, an employer cannot prevent competition from former employees, including a former employee using expertise acquired during his or her former employer in legitimate competition (ie. joining a competitor company or forming a new company).

Gardening leave clause

A gardening leave clause allows an employer to place an employee who has given notice of his or her resignation on "gardening leave", and essentially keep them away from work during the notice period, while still remaining an employee, and therefore subject to their continuing obligations to act in their employer's best interests.

It is best to ensure you have a clear contractual right to place to employee on gardening leave to avoid potential arguments that the employer has repudiated the contract and constructively dismissed the employee - this could also result in any post-employment restraints being declared void.

During employment: protect confidential information

During employment, communication is key. It is important to set expectations for employees from the outset as to what is and what isn't acceptable regarding the use of confidential information.

Employers should provide employees with:

  • comprehensive company policies regarding access and use of sensitive company information;
  • training on how to maintain and protect sensitive company information; and
  • the consequences of information theft.

Employers should also emphasise to new employees that information theft is not tolerated, and outline the consequences of engaging in information theft early on in their employment.

It is also useful to clearly establish what information employees are allowed to access. Setting clear expectations on employees may help prevent unintentional access of confidential information and will also assist in prosecuting an employee who has committed theft. (For example employers may face difficulty in persuading a court that stolen information is truly confidential if all employees were easily able to access that information during their employment.)

Employers should also take practical steps within the company to protect sensitive information including putting systems in place that restrict access to confidential information and monitoring access and use of confidential information. Employers could consider investing in data protection software or encryption technology to prevent external parties from receiving company data.

Employers should flag confidential documents and only share sensitive information as appropriate. Access to confidential documents should only be given to those who need to know and be as limited as possible.

On resignation: reiterate your terms

When an employee resigns, it is important that employers have a standard procedure in place for their departure. This should include:

  • immediately considering whether an employee should be placed on gardening leave given the nature of their role, the type of information they have access to and their client/customer contact;
  • conducting a review of IT systems and/or personal electronic devices if an employer suspects the employee is joining a competitor or if they are exhibiting suspicious behaviour;
  • monitoring all outgoing emails after resignation and prior to departure, and flagging any that contain company information;
  • requiring a confirmation that the employee has returned all information and intellectual property back to the company prior to departure;
  • requiring the employee hand over personal electronic devices (computers, laptops, tablets, smartphones etc.) prior to departure; and
  • an exit interview, where the employee should be reminded of his or her ongoing, post-employment confidentiality obligations and the consequences of a breach of those obligations.

Help, I've been robbed!

Lastly, if you suspect that an employee has accessed or stolen company information, it is crucial that you act quickly to investigate concerns and take swift action to minimise damage.

Employers should immediately quarantine the employee's personal electronic devices following their departure and undertake a forensic analysis of those devices to confirm whether information has been accessed. If an employee has taken computer files, a forensic expert can examine their devices to determine whether the employee downloaded or copied files in the lead up to their departure.

Evidence uncovered by a forensic expert can then be used to seek an injunction to prevent disclosure of confidential information and to support a claim for damages or an account of profits in the future.

If evidence of information theft is discovered before the employee has departed, employers can discipline or summarily terminate their employment for breach of contract. This sets an example for other employees that such behaviour is not tolerated by the company.

If the confidential information has been disclosed or utilised (or you suspect it will be) by the employee, employers should commence litigation and can seek an injunction to prevent the misuse of this information and in certain circumstances take steps to prevent an employee joining a competitor in breach of a restraint of trade provisions. Litigation is also possible to recoup any monetary damages for breaches of the Copyright Act, Corporations Act, employment contract and the equitable duty of confidence, however these damages will need to be able to be substantiated.


Preventing employee information theft before it occurs is the best option, and employers should seek to implement any or all of the measures outlined above to protect themselves from the often ignored threat within. However, if you are concerned that an employee has taken confidential information, you should seek legal advice and take action immediately.

At the end of the day, the impact of not taking steps to protect confidential company information might prove more costly than you think.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Holding Redlich
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Holding Redlich
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions