ARTICLE
21 November 2012

Asia Pacific: Protecting confidential information - trends and tactics for today's employer

Challenges in protecting confidential information include technology, social media and the globalisation of business.
Australia Employment and HR
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WORKPLACE RELATIONS AND EMPLOYMENT UPDATE (AUSTRALIA)

Changes within the workplace have given rise to new challenges in protecting confidential information, particularly the growth of new technology and social media and the globalisation of business. With employees bringing their own electronic devices to work and social media allowing employees access to client contact information both inside and outside work, it makes protecting confidential information a constantly evolving area. Privacy and cross-border data protection laws add further complexity. It is likely to be only a matter of time before such issues come before the courts. Employees automatically have duties to their employers not to knowingly misuse or wrongfully disclose their employer's confidential information during employment. However, when employees leave their employment, the business can be less protected.

There are essentially four categories of confidential information. The category which will apply is likely to depend on the nature of the employment, the nature of the information itself, whether the employer has impressed the confidentiality of the information on the employee and whether the information can be easily isolated from other information which the employee is free to use or disclose. A recent DLA Piper survey Protecting confidential information: Trends and tactics for today's employer shows that employers are concerned about protecting a wide range of confidential information: from design details and manufacturing processes to marketing strategies, pricing structures, organisational changes and human resources issues.

Confidential information is often one of the most valuable assets of a business. Every business has information that it considers both integral and invaluable to its success, and a competitive edge in the marketplace may rely on a business having, or developing, certain information above and beyond that of its competitors. In this challenging economic climate, there has never been a greater need for employers to protect that information. Confidential information can, of course, be subject to threats from outside the business due to theft, hacking, or commercial espionage. However, the biggest threat to confidential information often comes from inside the business. Many employees will have access to valuable knowledge about customer contacts and financial and strategic business intelligence in the course of their employment, all of which will be an attractive asset to any competitor seeking to encroach on the employer's market.

There has already been significant growth in recent years in the number and types of disputes about misuse of confidential information and unlawful competition by employees and directors. Unfortunately, case law demonstrates that the law provides employers with very little protection as of right. Changes within the workplace have also given rise to new challenges in protecting confidential information, particularly the growth of new technology and social media and the globalisation of business.

Taking effective action to protect confidential information must begin at the outset of the employment relationship. It is vital that duties of confidentiality are expressly set out in the contract of employment, that employees are informed about the types of information which must be kept confidential, that policies guide employee behaviour to maintain confidentiality and that appropriate restraints are in place for key employees when employment terminates.

Our recent survey carried out in June/July 2012 indicates that employers are not embracing the planning and proactive management that is needed to achieve effective protection. The survey shows that 36% of employers ask employees to keep details of business contacts on databases which the employer does not own or control, whether on the employee's own database (28%) or a social media site such as LinkedIn (8%). A further 3% have no rules at all about where employees can store business contact details. This means that many employers are allowing confidential information to be managed by their employees at will. This is a risky and potentially damaging strategy, which leaves employers exposed to its misuse.

A high percentage of respondents (66%) to the survey said that they were concerned about the threats posed to confidential information by social media, but a large number (61%) still do not have a social media policy regulating employee behaviour. Without such a policy, employers are severely hampered in their ability to take action against any employee misuse of confidential information on these sites. This does not appear to prevent employers from monitoring these sites, however, with 68% monitoring either employees' general use of social media or specifically to spot misuse of confidential information. Nearly a quarter of employers ask employees for log-in details for social media sites and 36% are planning to do so in the future. These findings raise concerns. They suggest that employers are engaging in active monitoring despite the absence of proper procedures and are not giving thought to the implications or consequences of their actions.

In the Asia Pacific region, employers are not properly considering the risks posed by social media networks such as LinkedIn, which is a tool employees can use after their employment to retain client contact details and remain in touch with those clients. Employers are not giving thought to how they might use employment contracts to regulate an employee's use of that form of media after the employment ends.

Employers must therefore be urged to take a careful look at the information they are concerned to protect and to conduct an assessment of the risks which may result in its disclosure or loss. They should then consider the measures which they need to take to achieve effective protection. The survey findings suggest that many employers will find their existing contracts of employment and staff policies fall far short of achieving effective protection. In the current economic climate, employers cannot afford to be complacent; now is the time to equip the business with the tools it needs to protect its secrets and limit its exposure to legal risks.

Key steps for protecting confidential information

  • Contracts
  • Policies
  • Training
  • Monitoring
  • Restricting access.

Click here to request a copy of the report.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.


DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to www.dlapiper.com

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