26 Mar 2009

Workplace Confidential: Protecting confidential information when employees leave

by Saul Harben, Donna Ballantyne

Your confidential information might also be protected by copyright laws. Employers should ensure their employees are aware of their obligations in handling work-related material.

In today's technological age its easy for employees to make off with their employer's confidential information. With a click on "send" an employee can email documents outside the organisation, often without being detected until after they have resigned.

In the recent case of Luxottica Retail Australia v Grant [2009] NSWSC 126 (9 March 2009) an employer responded in a fairly novel way when it discovered an employee, who had resigned, had emailed documents to her home email address. It sued the employee not only for breach of contract, but also for copyright infringement.

The departing employee and the email trail

The defendant employee, who worked for the plaintiff company as an optometrist, was offered a job with a competitor. Before giving notice, the employee forwarded 23 emails from her work email to her home email, including attached documents such as training manuals. Subsequently, the employee also forwarded one of the documents by email to her husband, who happened to work for the competitor. After the employee had given notice, the company's recruitment manager checked the employee's emails and discovered the forwarded material. The company terminated her employment the same day and commenced proceedings for an injunction and damages, arguing that in emailing the documents, the employee had breached her employment contract and contravened the Copyright Act.

There was no dispute that by forwarding the documents to her home email address the employee had infringed the company's copyright. It’s a little understood fact that merely the act of emailing a document is to "reproduce" it for the purpose of copyright laws.

It was also found that the employee had breached her employment contract. A detailed confidential information clause in the employee's contract of employment prohibited her from using or disclosing confidential information (as defined) or attempting to do so. The Court found that in forwarding one of the documents to her husband's work email from her home email, this was a breach of the employment contract.

The Court did not however think that it was a breach of contract for the employee to have forwarded the documents to her home email address in the first place, since she was still employed by the company at the time (and also, presumably, because this email address was personal and only accessible to her). It may have been persuaded in this view by the fact that the employee routinely worked from home and used her home email for work purposes. It was significant that the written contract did not prohibit the employee from forwarding documents to her home email address with the intention of later using them for purposes outside of her work for the company.

Having obtained an injunction to stop the employee from dealing with her computer files containing the documents, and obtained the employee's agreement to deliver up or destroy all of the relevant documents, the company ultimately suffered no loss for which it could maintain a claim for the usual damages. However, the company still proceeded with a claim for nominal damages for breach of contract, and "additional damages" for breach of copyright.

The copyright claim

The Court accepted the employee's evidence that she was not aware that her actions constituted a breach of that copyright. It also took into account the fact that the employee had not made any attempt to cover her tracks, such as deleting the forwarded emails from her work computer. It was also noted that the employee had offered to hand over all hard copy documents to her solicitor and delete all electronic copies on the first day of the trial.

The company was awarded the princely sum of $10 in nominal damages and its claim for additional damages under the Copyright Act was dismissed. However, the Court indicated that this reflected the relatively non-egregious conduct of the employee and the fact that she had not accrued any benefit from the infringement. In the end result, regardless of the sum awarded, the company achieved its aim of having the documents returned to it and not used against its interests. Also, in pursuing damages against the employee the company presumably intended to send a strong message to its employees about the attitude it takes to protection of its confidential information.

Implications for employers

There will always be cases where departing employees are tempted to take with them confidential information, whether they are aware this is unlawful or not. Their reasons may not even be for personal gain. In this case the employee said she wished to have copies of some of the documents simply because she had worked hard on them and was proud of her work. It's often a good idea to restrict or more closely monitor the email traffic of such employees, because the earlier any issues are discovered, the more quickly and easily they can be resolved.

In actions for breach of copyright the assessment of damages depends to some degree on the extent of the person's knowledge that the act constituting the infringement is an infringement of copyright. Although in this case the employee had read and signed a code of conduct, and an internet access and email policy which required compliance with all copyright laws, the employee still did not consider that her actions were in breach of copyright. Such policies should be introduced with appropriate training so that employees understand their obligations.

This case also illustrates some of the difficulties arising from employees using personal email accounts for work purposes. Where home email addresses are used, appropriate safeguards may need to be put in place to ensure that the employee understands their obligations to use documents sent to their home only for work purposes and to destroy copies of information stored at home on termination of their employment.

Thanks to Steve Bowler for his help in writing this article.


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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.