Employers may claim that information an employee accumulates during their employment is confidential and justifies a clause in their employment contract preventing them from competing against their employer if they leave.
In NOVA Employment Ltd v Michelle Hira & Ors (2021), an employer that provided direct care services in the NDIS sector sought an interim injunction to restrain three ex-employees from working for a competitor.
The ex-employees were subject to post-employment restraints, operating for periods ranging from 12 to 24 months, which prevented:
- solicitation of business from clients;
- being engaged by competitors;
- soliciting employees; and
- interfering in client or supplier relationships.
What information is protectable?
The employer needs to convince the Court that the information acquired by the employee during their employment with the employer is protectable.
The following information is not protectable by a restraint:
- the knowledge, skill and experience an employee accumulates during employment; and
- information the employee acquires from sources other than the employer, even if useful and valuable to the employer’s business.
The employer in NOVA Employment Ltd v Michelle Hira & Ors (2021) claimed the protectable information was their ‘forms and processes’ that underpin their ‘methodical approach to service delivery’. The Court considered this to be know-how, not confidential information that the employer can protect.
The employer claimed the restraints were included in the employment contracts to ensure it protected the investment it had made in securing, training and supporting its valued employees. The Court regarded this as an indication that the restraints did not seek to protect the employer’s confidential information. The contract definition of confidential information did not appear to apply to the employer’s processes, and its forms giving effect to them, represent years of accumulated experience and refinement.
When will a court grant an interim injunction?
In a breach of restraint case, the employer may seek an interim injunction to prevent an ex-employee from working with a competitor on the basis that the remedy of damages may not be sufficient to compensate for the harm caused by a breach of the restraint. Given this would interfere with the employee’s ability to earn their livelihood with a new employer, the Court will balance the competing interests in determining whether an injunction should be granted.
In NOVA Employment Ltd v Michelle Hira & Ors (2021), the Court refused to grant the interim injunction to the employer to prevent the ex-employees from working for the competitor because the ex-employees:
- had been employed for 2 months at their new employer;
- had given undertakings not to solicit clients or interfere with client relationships;
- had not been employed as high-level managers;
- earned low levels of pay; and
- serviced persons with disabilities in need of assistance, which was a social benefit.