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Post-employment breach costs new employer

Post-employment breach costs new employer

A recent decision by the Full Court of the Federal Court of Australia marks new territory in the scale of remedy for post-employment breaches with a new employer hit with a $6.5 million order.

Two employees left Employer A and took up roles with direct competitor Employer B. The Court found that the employees had engaged in seven breaches of their fiduciary and contractual duties to Employer A. The breaches included emailing Employer A’s business and financial intelligence to private email accounts and using the material to sell their services to Employer B. Other breaches included soliciting business from Employer A’s clients.

The Court determined that the two employees were clearly seeking to develop a successful relationship with Employer B by actively approaching all of Employer A’s clients. As such, the Court found that Employer B was actively participating in a dishonest breach of fiduciary duty by the two employees.

Without the breaches of duty in which Employer B was knowingly involved and without the two employees taking advantage of their positions with Employer A, Employer B could not have made the profits it did.

Accordingly, the Court ordered Employer B to pay Employer A more than $6.5 million – an amount calculated with reference to the profits  owing from the breach.

 

Take heed!

The case is an important reminder that employers must be wary of information that new employees bring with them from previous employers, as they will have obligations of fidelity and confidence which courts will uphold.

Where breaches of these obligations profit the new employer, the result may be a sizeable account of pro ts against the new employer.



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