Can you keep a secret? What confidentiality do your workers owe you?

By Andrew Hobbs on January 22nd, 2018
  1. Workplace Policies
  2. Privacy & Data Protection


EMPLOYEES who leave your organisation to work for a competitor, or to start up their own enterprise, can pose a serious risk to your business, in terms of the valuable information they have learned while working for you.

While it is important for you to take steps to ensure that your business is protected, Holding Redlich lawyer Lauren Drummond says it is important to understand that not all information about your business is confidential.

What is not confidential information?

Generally, confidential information used in business gives you an advantage over your competitors and other people who do not know it or use it.

For information to be confidential it must have a character of a ‘trade secret’, such as formulas, manufacturing processes, marketing plans, business strategies, client lists, pricing information, or profit and loss figures.

It cannot be information that is widely known or in the public domain – and general information acquired during employment is not confidential information.

In addition, employees are free to use skill, experience and know-how acquired in the course of their service with their former employer.

With that established, you might be relieved to know that your employees do have some obligations to keep that private information confidential.

Employee obligations during employment

While they are employed, your workers have a common law obligation to observe a duty of good faith and fidelity to you.

This means they cannot act adversely to the employer’s interests, including misuse or unauthorised disclosure of their employer’s confidential information.

Employees also owe a duty of confidence. This duty continues after the employment relationship has ended.

Further to this, under the Corporations Act 2001, an officer or employee of a corporation must not make improper use of information obtained by virtue of their position to gain an advantage for themselves or someone else, or to cause detriment to the corporation.

Contractual obligations

Generally, employees must comply with the following conditions in their work contracts:

  • only use the employer’s confidential information as required to perform employment duties;
  • assign all intellectual property to the employer that is developed or created in the course of the employment;
  • obey lawful and reasonable directions of the employer; and
  • act in the employer’s best interests during the course of employment.

Lauren recommends that you tailor your employment contracts to address the specific position of each employee and the services that they perform for the business.

This means regularly reviewing and updating employment contracts to ensure they are compliant with current laws and so the business is protected when an employee is promoted to a new position where they may be in possession of confidential information or other trade secrets.

She also suggests that employers should restrict access to confidential information to only those employees that require it, and have those workers inform you if it is disclosed to a person who is not authorised.

You can incorporate a new term that both you and your employee have agreed to into an existing employment contract by giving the employee reasonable notice that the term, in a separate document, will become a part of that contract.

Unless the employee raises an objection, the new term will become part of the contract at the end of the notice period – which chapter E1 Employment Contracts recommends in the Employment Law Practical Handbook should be the same as the time needed to terminate the contract.

On Wednesday, we will look at what to do to protect your company’s confidential information when an employee resigns, and how to put post-employment restraints in place.

For further information, consult chapter C1 Confidential Information in the Employment Law Practical Handbook.

Drawn up by the legal team at Holding Redlich, the chapter contains valuable information about an employee’s obligation of confidence to you and how you can identify which information in your business is confidential.

If you don’t have it already, why not sign up for an obligation-free trial to the handbook and see for yourself what additional information it has to offer your business?

Click here to find out more.


Related Articles: