Enforcing confidentiality and restraint of trade clauses

Working with a competitor behind an employer’s back is never a good idea.  Taking confidential information and poaching the employer’s customers is just as bad.  And trying to cover your tracks is only going to land you in hotter water.

Mr Hill found all this out the hard way recently, when his former employer, Tex Online Limited, took him to the Employment Relations Authority. He ended the case $110,000 poorer when the ERA found:

  • while he was still employed, he helped another company set up in competition with his employer – a serious breach of his duties of good faith
  • he breached his restraint of trade clause when he resigned and set up in competition with Tex
  • he breached his “no poaching” clause by soliciting Tex’ customers to switch to his new company – the ERA ordered him to refund the money that Tex lost when one customer agreed to transfer
  • he copied confidential customer information, and pricing and sales information and took it with him on a USB when he resigned (a breach of his confidentiality clause)
  • he tried to cover his tracks by deleting his emails and scrubbing the USB, but forensic examination of the computer equipment still showed what he had done.

The expense and the resulting publicity won’t have helped his new business get off the ground either.

It pays to get advice before taking a step that could prove seriously costly if things go wrong.