Confidentiality Agreements with Your Employees

An important part of a business risk management plan that is often overlooked is to put in place measures to restrain departing employees from using confidential information of the business for the benefit of future employers or competitors. Almost every business has information which is sensitive and confidential and which provides it with a competitive edge. Failure to put in place appropriate measures to protect such intellectual property could mean the business losing its competitive edge.

The law imposes a general duty of fidelity on an employee. This means that the employee must be faithful to the employer during the period of employment. This duty is diminished once the employee departs the employer. On departure the employee’s duty becomes not to misuse confidential or secret information of the employer in any new role the employee may gain.

An important element, that is most commonly disputed, is identifying what information held by the employee is confidential and what is not. The most efficient way to ensure that there is no ambiguity and to overcome this problem is to make it clear in an employment agreement.

A court will not allow an employer to restrain an employee from using general information obtained in the ordinary course of the employee’s employment or information that is considered general industry know-how. For information to be protected, it must be specific and confidential and must be made known to the employee as being confidential information. Unless it has been made clear to the employee that they must not use certain information once departing the organisation, generally it will be open to the employee to utilise all the information obtained from the previous employer.

The terms of an employment agreement will generally become essential in a court deciding whether or not a former employee should be restrained from using confidential information. Should you or your organisation require any assistance in implementing new or amending existing employment agreements or confidentiality agreements please contact Darren Foeng or John Hynd on (08) 8223 6499.