Employees ordered to pay millions to employer for breaching confidentiality agreement…

Three employees were ordered to pay damages to their ex-employer when they used confidential information without the employer’s consent.  The confidential information included a client list which was used to start a competing business.  The unauthorized use of confidential information resulted in financial loss to the employer, which the employer sought compensation for.

Much like employers owe duties to their employees, employees have responsibilities to their employers.  One of the duties that employees owe to their employers, is to keep confidential information confidential. 

Even if there is no express confidentiality term in the employment agreement between the parties, the Courts have always implied the duty of confidentiality where an employee has access to confidential material in the course of their employment.

The duty requires that an employee must not disclose (during or after their employment) any information received in confidence during the course of that employment.  Where an employee breached this duty, and employer can take action against the employee. 

In order for there to be a breach, two requirements must be satisfied:

•          the information has the necessary quality of confidence; and
•          that the employee has made unauthorised use of the information to the detriment of the employer.

The necessary quality of confidence:

To define the “necessary quality of confidence” the Court provided four relevant factors to help evaluate the nature of potentially confidential information:

•            the nature of employment;
•            the nature of the information itself;
•            whether the employer impressed upon the employee the confidential nature of the information; and
•            whether the information can be easily isolated from other information which the employee is free to                 use or disclose.

When does the duty not apply?

Generally, an employee can take away and utilize skills they have acquired in a job, even if those skills were acquired as a direct result of employment. 

Not all information which the employee acquired during employment is protected by duty of confidentiality.  Information that was obtained during employment may nonetheless be outside of the duty of confidentiality, if that information can be classified as general information.  That is, the information is also discoverable outside of the employment relationship. 

The Court will make an assessment on a case by case basis.  If you have any doubt about the duty of confidentiality, it makes sense to get expert advice.  If you get things wrong, you risk financial loss (for employers) or being pursued for damages (employees).  

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced employment law team who can answer your questions and put you on the right track.