Employee Confidentiality and Restraints of Trade
Employee confidentiality is a legal principle that prevents an employee from using or disclosing to a third party any confidential information that belongs to their employer during employment (other than in the course of the employee's employment) or after the employment has ended.
Where there is no written employment agreement in place, the law will generally still operate to protect the employer's confidential information. However, it is wise for an employer to have a written employment agreement in place which contains a confidentiality clause, so that 'confidential information' is clearly defined.
The problem is that it is very difficult for an employer to prove that an employee has misused confidential information, as employee's can always legally argue that they simply replied on their own memory to recall the information that is being claimed to be confidential. This is why it is wise for an employer to take full advantage of a 'restraint of trade' clause in an employment agreement.
A 'restraint of trade' is a clause in an employment agreement that generally prevents a former employee from:
- starting their own competing business; or
- working for a competitor,
for a defined period of time after the employee's employment has ended (i.e 6 months), and possibly within a defined area (i.e within a 5km radius of the employer's business location).
The law automatically protects an employer's confidential information from being misused by an employee whilst the employee is employed with the employer, even if there is no written employment agreement in place. However, being able to prove that an employee has misused such information after the employment has ended is far more difficult.
Given this, a restraint of trade clause will generally be used so that an employer does not have to prove that a former employee has misused its confidential information - the employer will only have to prove that the former employee has breached the restraint of trade clause by starting their own business or working for a competitor within the restraint time and area. Such a clause is designed to continue the protection of the employer's business and confidential information after the employment has been terminated.
It should be noted that such a clause may be invalid if it is unreasonable and goes beyond what is necessary to protect the legitimate interests of the employer's business.
FWO's standard Detailed Employment Agreement and Comprehensive Employment Agreement both contain clauses covering confidentiality and restraints of trade that operate to protect an employer's business.
If your business is a Member of Fairt Work Online, you can access these standard agreements as part of your membership in the ‘Documentation’ part of their Members Area.
Non-members can purchase these standard documents on our Online Store - CLICK HERE for more information.
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