How do I enforce a restraint of trade or misuse of confidential information?
Should you become aware that an old employee has gone rogue and is in breach of their restraint of trade or misusing confidential information for the benefit themselves or a third party, it is imperative that you act without delay. This is because the ability to seek an injunction (being a Court order prohibiting the employee from working) needs to be done as a matter of urgency. A failure to bring an injunction promptly will invite criticism from the Court. This is mainly due to the rationale that if the confidential information was highly confidential and important, the employer looking to protect this information would move to protect it without waiting.
When an injunction is sought, an employer will have to prove that there is a genuine issue to be determined by the Court (for example, that there is a legitimate business interest worth protecting). Further, a balance of convenience will need to be evaluated by the Court that falls in the favour of an injunction being granted. This relief is sought in the Supreme Court of New South Wales and can be a costly exercise. Prior to seeking injunctive relief in the Supreme Court, the following steps can also be taken to avoid the need for costly litigation:
- Upon the employee finishing their employment, conduct an exit interview and provide the employee with correspondence that leaves the employee with no doubt as to their ongoing obligations owed to the old employer and the duration of these obligations.
- Should you become aware of a rogue ex-employee working with a competitor in breach of their contractual obligations, write to them without delay seeking immediate rectification and an undertaking as to the return of all confidential information. This undertaking is a promise that is made to the employer and can be further used as additional evidence if the employee continues to breach their post-employment obligations
- Attempt to negotiate with the employee as to an acceptable restraint on their employment that will satisfy the needs of all parties.
In addition to the above, traditional litigation is also available for an employer to recover any monetary damages suffered for any breaches of the employee’s contract, legislation (for example, Corporations Act 2001), or the equitable doctrine of confidence.
Where employees are exposed to confidential information or intellectual property, prevention is always better than cure. Employers should look to implement any combination of the above strategies to best protect themselves from having to seek injunctive relief in the Supreme Court. It is impossible to know the full cost of the information, until you are looking to protect it.
Our employment law team regularly deals and assists employers managing issues in relation to termination of employees and post-employment obligations owed by employees. We take a practical approach to these issues with the overarching goal of protecting your business and taking pride in seeing your business go from strength to strength.