Minh Bui Law of Work Seminar Paper

8/6/2019 Minh Bui Law of Work Seminar Paper

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What is the nature and extent of the employee¶s duty of confidentiality?

Introduction

In every business enterprise, there is certain information that employer¶s wish to

remain confidential. This is particular vital in the global era where there is lower job

security, higher job mobility and situations where employees work multiple jobs.

Employees are bound by the duty of confidentiality, where they are forbidden to

disclose certain information obtained during the course of employment.1

The purpose of this paper is to explore the nature and extent of this duty of

confidentiality and legal options available to the employer if this duty is breached.

The main focus will be on the application of this duty towards customer lists.

What is the nature of the duty of confidentiality?

Firstly, it is imperative to analyse the term, µconfidential information¶.

Confidential information is often thought to be a form of property,2

but in Breen v

Williams,3 Chief Justice Brennan stated that what is important is the nature of the

relationship and not the particular information itself.4

Thus, confidential information can be classified as information supplied during a

relationship of confidence and it is inherent in that relationship that the information is

to remain confidential.

1 R osemary Owens, Joellen R iley and Jill Murray, The Law of Work (2nd ed, 2011) 267.

2Ibid.

3 (1996) 186 CLR 71.4 Ibid 71, 80.



Hence, the duty of confidentiality is equitable, as it imposes a personal obligation on

the person who knows the information not to disclose it.5

This has been unanimously approved in the High Court Case F arah Constructions Pty

Ltd v Say-Dee Pty Ltd.6

President Kirby further developed this doctrine by listing factors which helps in

determining whether information is confidential in Wright v Gasweld Pty Ltd.7

Factors which suggest that information is confidential are if it required skill and effort

to acquire, whether the employer had guarded the information cautiously, or the

employee is made aware that such information is confidential.8

What is the extent of the duty of confidentiality?

In Dale Casale v Artedomus,9

it was decided that public information was not

information protected under the duty of confidentiality.

This decision is appropriate because public information is accessible by anyone and it

would not be practical for former employees to be obligated to keep it a secret.

Additionally, employees¶ know-how and skill cannot be confidential information

(Triangle Corp Pty Ltd v Carsnew10 ) because know-how and skill cannot be restrained

or taken away. This reinforces the idea that labour is not a commodity.

5 Owens, R iley and Murray, above n 1, 268.

6 (2007) 230 CLR 89, [118].7 (1991) 39 IR 256.8 Wright v Gasweld Pty Ltd (1991) 39 IR 256, 271.

9 (2007) 165 IR 148.

10 (1994) AIPC 91-099.



Humans have the capacity to develop their skills and knowledge which ultimately

becomes a part of them and cannot be appropriated by anyone.

The duty of confidentiality being equitable in nature means it is applicable to

employees during and after employment.11

In Robb v Green,12

an employee does not have the right to take away a list of customers

under the duty of confidentiality, because it requires µskill and effort¶ (Wright v

Gasweld Pty Ltd ).13

This doctrine has also been supported in F accenda Chicken v F owler.14

The rationale is that many effort and time had been invested into building a customer

list, and it would be unjust if someone takes something away that took years to

develop.

Equity would balance the µspringboard¶ effect enjoyed by the former employee by

awarding an account of profits for the former employer.15

It is notable that the remedy will only be for a certain period to negate the unjust

advantage obtained by exploiting the confidential information.

It should be noted that if the employee conjured the customer list using their memory,

there will be no breach of duty ( F accenda Chicken v F owler )16

because it is part of the

employee¶s know-how and skill.


12 (1895) 2 QB 315.

13 (1991) 39 IR 256. 14

(1987) Ch 117.15

Owens, R iley and Murray, above n 1, 270. 16

(1987) Ch 117.



What can the employer do to protect their interests?

Employers can prevent information from being disclosed using an express covenant,

but the restraint must be reasonable and it will be nullified if it is an illegal restraint of

trade.17

The aim of an express restraint is to protect the employer¶s legitimate interest, which is

to protect truly confidential information from disclosure or preserve special µcustomer

connections¶.18

The type of information that the employer wishes to prevent from being disclosed

must meet the criteria of confidential information outlined in Wright v Gasweld Pty

Ltd ,19

to ensure that employers do not restrict usage of publicly available information

or the former employee¶s knowledge and skill.

But an issue arises when the employer wishes to protect secret business strategies and

techniques, which would likely satisfy the criteria of confidential information in Wright

v Gasweld Pty Ltd 20

but it can also become part of the employee¶s know-how and skill.

Whether the express restraint would be an illegal restraint of trade is outside the scope

of this paper, but if it is enforceable then the former employee will be obligated to

adhere to the duty of confidentiality and keep it a secret.

In cases where an enforceable express covenant is breached, the employer will be

entitled to normal contractual remedies such as damages.


18 Ibid.

19 (1991) 39 IR 256.

20 Ibid.



Given that the duty of confidentiality exists in equity, equitable remedies such as

injunctions, equitable compensation or account of profits are also available for the

employer.

For example, in H alliday & Nicolas v Corsiatto,21

the former employer was awarded

an account of profits for 12 months after a former employee took the customer list to

another competitor.

Equity recognises that the employee must compensate the employer for deriving

benefit from that list, but the remedy will only last temporarily to negate that unjust

advantage.

Conclusion

In conclusion, the duty of confidentiality mainly exists in equity, but can have

contractual ramifications via express restraints.

The most important factor when determining the existence of a duty of confidentiality

is whether the relationship between the employee and employer is one of confidence.

The scope of this duty extends to post-employment, protecting the employer¶s interests

because information such as customer lists requires a lot of effort, commitment and

time to develop, and it would be unjust if that benefit is taken away without

compensation.

21 (2001) NSWCA 188.



But equity will act just enough to remove the unjust advantage gained by the former

employee through exploitation of confidential information, reflected by remedies such

as injunctions and account of profits lasting only temporarily.

Documents

Minh Bui Law of Work Seminar Paper