A major concern for all companies who lose staff to competitors is what happens to the confidential (and highly valuable) information that they have accessed or they possess. At law there is a duty owed by current and former employees to their employer to not breach this confidence.  It is also common for the terms of an employment contract to explicitly reference this obligation.

A key factor of this protection, however, is that it only applies to confidential information.  This could include sensitive client data, intellectual property, trade secrets, processes or business plans.  Throughout the evolution of this law the main defence has been when the information lacks this requirement of confidentiality because it is ‘public knowledge’.

In a recent case in the Supreme Court of New South Wales, Justice Sackar found that even though some client data may be available on Facebook it still was still confidential information.

The Case

Dargan Financial Pty Ltd ATF the Dargan Financial Discretionary Trust (trading under “Home Loan Experts”) v Nassif Isaac [2017] NSWSC 1077 (16 August 2017) concerned a mortgage broker who was an independent contractor for the Plaintiff. The Defendant left to work for a competitor in a similar capacity.  The employer had an agreement with the Defendant that sought to prevent him from disclosing confidential information or from competing against his former employer for 18 months after leaving them.  Despite this, the Defendant approached and accepted approaches from nine former clients of the Plaintiff and used confidential client list information to do so.

The Defendant argued that the client list was not confidential information as the employer had a policy of encouraging mortgage brokers to ‘friend’ clients on Facebook so that they could maintain contact. The Defendant claimed that this resulted in anyone being able to identify and contact the employer’s client list.

The Decision

Justice Sackar disagreed with the Defendant’s argument, instead finding that:

… the clients that have posted publicly do not account for all the clients the Defendant acted for… . Further, details beyond the names of the clients cannot necessarily be derived from a mere Facebook post … the privacy settings of the clients may prevent viewers from accessing any further information beyond their Facebook name, and also from making direct contact with them through Facebook.

Message for Employers

This decision highlights the importance of having clear post-employment obligations in all employment contracts. All employers should ensure that there is a clear understanding between them and their outgoing personnel to avoid potential issues.

While it may be tempting to include overly broad clauses, employers must remember that courts have been willing to ‘read-down’ unreasonable obligations. In the current case, prior to the court hearing, the employer had conceded that the confidential list of clients excluded all of the Defendant’s personal friends and family clients.

We recommend seeking legal advice prior to employing staff who will be dealing with sensitive information to ensure that sufficient safeguards have been put in place to protect a business after any staff member leaves.

In the event that you suspect that a former employee is breaching their obligations, we recommend that you immediately seek legal advice to minimise any potential harm. The Equity Court also will find against an employer in the event of unnecessary delays in protecting its rights.  In other words:  “Use it or lose it”.