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Protect your business from unscrupulous staff

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Prevention is Better than the Cure

A recent case in the Queensland Supreme Court has highlighted the dangers of inadequately protecting the intellectual property of your business from dishonest employees. Whilst the employer obtained an Order for damages in excess of $212,000, the actions of the two employees contributed to a forced sale of the business at a heavily reduced sale price.

The Supreme Court of Queensland handed down the decision on 25 March 2009. The employer had a mobile communications business on the Gold Coast for 6 years and misplaced the trust in his service manager and installer who operated a business in competition whilst still employed with the plaintiff. The two employees utilised the customer lists, sales data, pricing requirements and software of their employer in order to compete against him. The employer appears to have no restraints of trade, confidentiality policies or written contract terms in order to protect the intellectual property of the business.

The Court held that the employees’ breached implied duties of good faith and awarded damages based upon lost profits and the contribution towards the reduced sale price.

The lesson to be learned from this case is those appropriate policies should be put in place demonstrating to employees that the intellectual property of the employer will be protected. These policies should include practical measures to ensure that confidential information can only be accessed for legitimate activities of the employer and that these protections will be monitored and enforced. Pre and post-termination restraints of trade and non-solicitation provisions in contracts of employment may have the effect of dissuading employees from carrying on in competition or preparing to compete against their employer.

Author: Charles Cody