Australia: Protecting confidential information: Restraint of trade clauses and workplace surveillance

Last Updated: 25 June 2018
Article by Dominic Russell

This article is the first piece in a three part series of blogs on how organisations can effectively protect themselves against employees stealing confidential information. Whilst this article focuses on both surveillance policies and restraint of trade clauses, parts two and three will focus on solutions to potential issues surrounding employees notice period.

Employment relationships are just like any other relationship: the only certainty is that they will eventually come to an end.

One unfortunate reality is that departing employees often pose the greatest risk to the future goodwill of a business, as they have had the opportunity to form relationships with the client base and supplier network. Similarly, employees will often have had widespread access to commercially sensitive documents and information, and have received training on how best to exploit it, at least for the benefit of the company.

One common way for businesses to try to protect their goodwill and prevent former employees from either poaching clients or setting up businesses in competition, is to include broad confidentiality terms and restraint of trade clauses in their contracts of employment.

Another unfortunate reality is that the most common obstacles faced by employers when seeking to enforce post-employment obligations are self-inflicted, usually coming as a result of a lack of evidence caused by poor planning and administrative oversights.

Reasonably drafted confidentiality and restraint of trade terms can be extremely effective, however courts will be reluctant to make orders to enforce contractual restraints if the company cannot demonstrate that the contract was properly entered into, and that the employee, through their conduct in breach of the contract, poses a genuine risk to a legitimate interest of the company.

With that in mind, businesses need to plan for the inevitable employee break-up from day one of their time with the company, and there are a few simple steps that businesses can take to give their contracts the best chance of being enforceable if their staff do run off and try to take the business with them.

Risk Management: From Day One

Obtain professional legal advice with regard to the employment contract. Restraint of trade terms can be particularly tricky to navigate, and will be closely scrutinised by a court. Be careful of using templates, as restraint terms should be tailored to each employee.

Ensure that a signed copy of the employee's contract is scanned and saved to a dedicated location on the company's computer system. A signed contract is the best evidence that an employer can have in proving to a court that an employee did agree to be bound to their post-employment obligations. Without a signed contract, it is possible that an application to enforce a restraint of trade term might be dismissed.

A couple of recent examples from my own experience illustrate just how easily this problem can occur, and similarly, how easily these issues could be avoided:

  1. The company issues the contract to the employee via email and the employee turns up to work without returning a signed copy. The company do not have a follow-up procedure in place.
  2. The company is attempting to enforce post-employment obligations against an employee who commenced with the company 10 years earlier. When employee started with the company, the responsibility for storing employment contracts had been given to an individual administrative officer who is no longer employed by the company. Now, nobody knows where the contracts were previously kept.

It is critical that employers have and maintain a comprehensive workplace surveillance policy.

Workplace surveillance by a company is largely prohibited throughout NSW and ACT unless the company has a policy in place which explains:

  1. the nature of any surveillance being carried out; and
  2. the purpose for which the surveillance may be used.

In the context of enforcing post-employment obligations, evidence obtained by an employer through unlawful surveillance, i.e. without a proper policy in place (such as evidence of emailing documents to themselves or secretly contacting customers) is likely to be inadmissible in court proceedings. Carrying out unlawful workplace surveillance may also attract civil, or potentially criminal penalties.

Businesses should recognise that even if they are told not to, employees will use their personal devices for work, unless they are given an alternative. Allowing staff to use their own devices can save a company money, but does also create risk. Providing staff with a company phone or laptop comes at a cost, but can have a number of potential benefits with regard to the protection of confidential information.

As an example, many people can and do access their company email account from their phone. Senior employees, and technical or sales staff will regularly send and receive commercially sensitive information via email. If staff are allowed to use their personal devices to access their company email accounts, company documents sent as attachments will find their way into personal cloud storage services such as Dropbox, Google Drive or iCloud. Another problem is that staff will use their personal phones to communicate with clients. Once an employee leaves the company, their contacts and text messages will go with them.

A company issued device on the other hand:

  1. can be configured to control access to the company network and mail server;
  2. can be monitored remotely to identify suspicious activity; and
  3. belongs to the company and therefore the device, and the data stored on it belongs to the company and must be returned when the employee leaves.

It is important to maintain strict IT security with proper controls, particularly over sensitive business information. Similarly, your company should make sure to regularly back-up emails, document management and accounting systems, and use continual monitoring of email and data usage.

It is wise for businesses that utilise cloud storage services not to authorise staff to use their personal accounts, and instead, to consider setting up a corporate account and providing individual user access credentials for each staff member. This way, when a staff member does leave, their access to the storage account can be removed by the company.

Some cloud storage accounts do contain logs which can be useful in identifying download activity, as well as any devices and IP addresses that have connected to the account. These logs often provide useful evidence of misappropriation of confidential information.

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.

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

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

Authors
Dominic Russell
 
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
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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