02 Dec Breach of Confidentiality – An employee has been ordered to pay his former employer $205,647.00

Many employers are concerned about the damage an employee could do if they were to take the company’s confidential information with them to a new employer.

This is a common fear but fortunately only realised by very few employers.  However, when an employee does breach the obligations of confidentiality they owe to an employer, the consequences can be significant.

In a recent case before the Federal Court of Australia, an employee was ordered to pay his former employer $205,647.00 as well as having an injunction imposed against him, restraining him from disclosing to any person any of the former employer’s confidential information.

The Facts

The case is SAI Global Property Division Pty Ltd v Johnstone [2016] FCA 1333 (14 November 2016).

In this case, Mr Johnstone was employed by SAI Global Property Division Pty Ltd as their Business Development Manager.  He was employed for a period from August 2015 to 12 November 2015.

Mr Johnstone resigned from his employment on 29 October 2015.  Three days before his resignation, he copied two computer files to a USB device which contained highly sensitive confidential information, including one document containing details of his then employer’s customers.

Following his resignation, Mr Johnstone was called to a meeting with the company’s HR Manager who provided him with a letter confirming his resignation and outlining his post-employment restraint obligations.  It also included a direction that Mr Johnstone was not required to work or attend the office during his notice period, however he would be required to respond to questions and queries until close of business 12 November 2015.  Accordingly, the last day of his employment would be Thursday 12 November 2015.

Despite this, Mr Johnstone accessed the Company’s confidential information again, with a view to identifying which customers of his then current employer were not customers of his new employer and on 2 November 2015, commenced employment with his new employer, a direct competitor of his former employer.

During the court proceedings, Mr Johnstone admitted that he had breached his employment contract by continuing to receive his salary from his employer while having commenced employment with his new employer and admitted infringing the company’s copyright in relation to the computer files that had been accessed.  Under cross-examination, Mr Johnstone admitted that he knew the documents he had copied contained confidential information, that he did not ask permission to copy the documents, he did not consider that he was permitted to copy the documents and he knew that if he had asked permission to copy the documents this would have been refused.

At court, the former employer sought:

1. An injunction restraining Mr Johnstone from using their confidential information;

2. $4,230.00, representing the salary Mr Johnstone had been paid for the two week period following his resignation, during which he had commenced employment with his new employer;

3. Nominal damages of $1.00 for copyright infringement;

4. Additional damages of $5,000.00 pursuant to the Copyright Act; and

5. Costs in the amount of $275,469.00.

The Court agreed that the former employer was entitled to each of the above, however considered the amounts sought for costs to be excessive in the circumstances.  Accordingly, the order for costs was that the employee pay the amount of $196,416.00 in costs.

Lessons to be learnt

This case is a timely reminder that employees can do significant damage to your business if they breach confidentiality.  To protect an employer’s confidential information and give them clear rights to pursue an employee or former employee for breaches of confidentiality, there should be clear obligations in the contract of employment with regards to how confidential information is to be treated during employment and after employment.

Additionally, of great significance in this case was that immediately after Mr Johnstone had resigned, he attended an exit interview where he was advised verbally and in writing of his post-employment expectations.  Accordingly, in circumstances where an employee leaves your employment, whether you have terminated their employment or they have resigned, it is important to provide them with a letter outlining the reasons for the termination or acceptance of their resignation and then remind them of their obligations with regards to confidentiality and post-employment restraints.

If you need us to look at your contracts of employment or letters provided to employees at the end of their employment, or have any questions regarding this case, please get in touch with one of the team from HR Law today.