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Terminated employees and confidential information

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Going...going...gone!

BlueScope Steel Limited was successful in its urgent Federal Court of Australia application to prohibit a former employee from using or destroying its confidential information, including intellectual property and software.

BlueScope Steel Limited v S [2016] FCA 4 (BlueScope Case)

BlueScope Steel Limited was successful in its urgent Federal Court of Australia application to prohibit a former employee from using or destroying its confidential information, including intellectual property and software.

The Employee was employed by Blue Scope Limited (the Employer) as a software development manager. At a meeting on 29 June 2015, the Employee was advised that as a result of the redundancy of her position, her employment would be terminated and the 12 year employment relationship would come to an end.

Whilst the employment of the Employee was terminated by the Employer, what had occurred before the meeting on 29 June 2015 and after the termination was of most importance to the Employer.

It was subsequently alleged by the Employer that in the hours before the redundancy meeting, the Employee had made a whole copy of her work computer hard drive, downloading copies of the Employer’s software, source codes, other confidential information and intellectual property belonging to the Employer. The Employer quickly commenced legal action in both Australia and Singapore for orders to prevent the use and/or destruction of its confidential information as well as for a search order.

Some months after the termination of her employment, the Employee was hired as the Innovation Manager for NS BlueScope Limited in Singapore, a direct competitor of the Employer.

After considering the evidence, Justice Bromberg was satisfied that the intellectual property was confidential information and of significant financial value and that there was a risk of financial loss to the Employer. He was also satisfied that there was an arguable case that without authorisation, the Employee took the confidential information when she left and had used it since her termination, including in her new employment with NS BlueScope.

Accordingly, Orders were granted prohibiting the Employee from using or destroying the confidential information.

 

So what can employers do to protect their confidential information?

This case articulates some of the real risks to employers when managing exiting employees. Although there is always a risk that an outgoing employee will do the wrong thing, there are some simple steps that can be put in place by employers to avert or diminish the risk.

The simplest measure is to ensure that employment contracts are appropriately drafted to include ‘protection of confidential information’ clauses stating that the employee is not to remove or copy or disclose confidential company information. This is particularly important for employees in senior roles who would have greater access to confidential company information.

Another very basic measure to implement is labelling confidential information as “confidential” to avoid any debate about the nature of the material and taking appropriate measures to secure that information (such as putting measures in place to prevent copying or downloading).

Other measures that an employer could implement include conducting ongoing monitoring of employee email and computer use and/or analyse the exiting employee’s computer before (if possible) and then immediately after their last day. This may assist in identifying whether an employee has (for example) emailed customer lists to their personal email account or made copies of company information to a portable hard drive. In some Australian jurisdictions, employees must be notified before such surveillance takes place, for example through a Workplace Surveillance Policy.

When there has been a breach or suspected breach employers must act immediately to seek the assistance of the courts. Any delay could be costly to the business, for example loss of business or sales if the confidential information is revealed to a competitor or result in the courts not providing the urgent relief requested.

Any time is a great time to review what measures your company has in place to protect confidential company information from being “going...going...gone!”

 

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

 

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