Former staff took confidential files

I run a small insurance broking business. My business deals with a lot of confidential information which the brokers have access to such as names and contact details of clients and the business they place. One of the brokers left last week to work for a competitor. I think he has taken information about our clients with him. What can I do?

Employees leaving and taking their employer's confidential information with them is a concern for many employers, especially in the insurance industry. Using confidential information to compete can severely damage an ex-employer's business. The law in this area is fairly complex and depends on the nature of the information and the industry. The same requirements of confidentiality will not attach to a refrigerated chicken business, for example, as it would in the insurance industry. But in all cases, there are steps employers can take to protect their confidential information.

Not all information is confidential. Employees may use skills they have gained during employment with one employer when they move on to another. But they may not use ex-employers' trade secrets and confidential information. Which of these categories information falls into is not always clear and depends on the facts of each situation. But it is generally accepted that an employee cannot take (or deliberately memorise) customer/client lists and use that information to compete with the ex-employer. On the other hand, an ex-employee who just happens to remember someone is an ex-employer's client, can approach that client (unless there is a 'restraint of trade' clause that specifically prevents them from doing so in their employment agreement.

In some cases, taking confidential information is theft. But the police may not give confidentiality complaints priority. If you want to make a complaint to the police, the best course is to instruct a private investigator to gather all the information the police will need in order to consider whether to charge the ex-employee. Although this involves expense for you, the police are more likely to pursue a complaint if some preparation is done for them. In any case, a private investigator's findings will help with any civil action you wish to take.

You should check the employee's employment agreement to see what it says about confidential information. Check that the information you think the employee took falls within the meaning of confidential information in the employment agreement and as explained above.

Also check for a 'restraint of trade clause'. This is a clause preventing the employee from doing certain things, such as competing with you or taking your clients or staff to a competitor, for a specified period after leaving your employment and within a specified geographic area. If there is no restraint of trade clause, you cannot prevent the employee simply from competing with you, but you can still prevent use of your confidential information. Restraint of trade clauses are not always enforceable.

You can start civil proceedings against an employee who has taken your confidential information. You may have grounds to obtain an 'Anton Pillar' order (basically, a civil search and seizure order) to allow you to enter the employee's home and/or workplace to look for your confidential information, if you need evidence it was taken. You may have grounds to obtain an 'injunction' against the ex-employee from the Employment Relations Authority. The injunction can be based on breach of confidentiality. To quickly protect your business, you can seek an urgent 'interim injunction' to obtain temporary orders quickly, sometimes without the ex-employee appearing at the hearing, until a full hearing can take place to consider the issues fully. If the employee competed with you while still employed, a claim might also be based on breach of the 'duty of fidelity'.

These days, employees often take information stored electronically. A good first step is to instruct an IT expert to examine the hard drive of the computer the employee used in your workplace. Particular attention should be paid to emails sent and received before the employee left and any evidence of copying of client information and databases.

You should start keeping a record of anything that suggests the employee has taken/is using your confidential information e.g.loss of clients, approaches to your clients by the ex-employee.

You should contact your lawyer for advice about your specific situation.

* Rani Amaranathan is a solicitor in the employment team of transtasman law firm, Phillips Fox.