Employment Law: Breach of Confidentiality – what you need to know
Increases in technology have made it easier for employees to transmit their employer's confidential information. Confidential information such as client lists, supplier information, pricing and financial arrangements, employee arrangements and business strategies can be invaluable to a business.
Examples of breaches of confidentiality include:
- copying data from a work computer or server onto a hard drive or USB before the end the employment
- disclosing information from a former employer to a new employer
- sending emails from a work email account to a personal email address.
Employers should ensure they take proactive steps to protect their confidential information.
WHAT TO INCLUDE IN YOUR EMPLOYMENT CONTRACT
The first step towards protecting your business' confidential information begins when you offer a prospective employee an employment contract. Employment contracts should set out an employee's obligations of confidentiality both during and after employment. The employment contract should:
- define 'confidential information'
- detail any exceptions to confidential information, for example information that is in the public domain
- expressly state that these obligations continue post-employment i.e. that the obligations survive the termination of employment and the contract
- state the employee is required to give prior notification if they are going to disclose confidential information to a third party
- detail the consequences for breaching these obligations
- tailor the confidential information clause to the relevant employee, where applicable.
EMPLOYEES ALSO HAVE OBLIGATIONS OUTSIDE THE EMPLOYMENT CONTRACT
Separate to contractual obligations, employees also have equitable and statutory duties in relation to confidential information.
The equitable duty of confidence arises where information with the necessary quality of confidence is imparted on the employee in circumstances that creates an obligation of confidence. Employees also owe fiduciary duties to their employer to act in their employer's best interests during their employment.
If the employee was employed by a corporation, sections 182 and 183 of the Corporations Act 2001 (Cth) may apply. The Corporations Act prevents an employee of a corporation from using their position or information to gain an advantage for themselves or to cause a detriment to the company.
HOW DO YOU AVOID A POTENTIAL BREACH OF CONFIDENTIALITY?
Confidential information should be only disclosed to employees who require access to the information i.e. access should be limited to those employees who require it for the performance of their duties. There are practical measures that employers can take, including password protecting documents and restricting access to parts of the employer's computer system.
When an employee's employment is terminated, or the employee resigns, employers should remind the employee of their obligations of confidentiality at the time of exiting the business.
In circumstances where the employer suspects confidential information has been taken, the employer should take prompt action and seek legal advice as required.
One approach is for the employer to instruct their legal representative to write a letter to the employee to prevent disclosure, or further disclosure, of the confidential information. This letter can:
- put the employee 'on notice' of their continuing obligations;
- set out any concerns or suspicions the employer has about the employee breaching or intending to breach their obligations; and
- request the employee sign an undertaking.
If the employer has evidence that the employee has breached their obligations, the employer can consider issuing legal proceedings.
SEEKING THE RIGHT ADVICE WILL SAVE YOU TIME AND MONEY IN THE LONG-RUN
By seeking specialist advice from MDC Legal, you will be aware of the duties of confidentiality and you will understand the importance of safeguarding your business' confidential information.
Our expert team will provide you with comprehensive advice on your employment contracts and dealing with a potential breach of those obligations.
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.