OPINION: This case is all about what happens when employees can be shown to have breached their employment agreements.
A company, "Z", employed Mr B from October 2011 to April 2013.
Mr B was initially employed by Z part time in a customer support role. His initial terms of agreement were governed by a written individual employment agreement which contained confidentiality obligations and various restrictive covenants which endured beyond the termination of his employment.
The agreement also included confidential information and intellectual property, conflict of interest, employer's policies and employer's property clauses which applied during his employment.
In February 2012 Mr B was promoted into a full-time role as a website results specialist. His new employment agreement was essentially the same as his old agreement. As part of his new role Mr B had greater in-depth interaction with specific individual customers and involvement in the planning process for various customers' websites. He was also trained in the use of Z's confidential business "know how" and intellectual property.
As is often the case in these sorts of sagas something occurred in February 2012 that resulted in Mr B being unhappy with the way he was treated. On that occasion he complained about a senior Z manager. It was investigated and resolved, but Mr B was left dissatisfied.
Later in June 2012 a staff member complained about Mr B and this was investigated and resolved. Again Mr B was unhappy with the way it was resolved.
About the same time Mr B was given an unsolicited 20 per cent pay rise and was told he was a valued member of Z's team.
Unbeknown to Z, Mr B became disillusioned with his employment, believing he was overworked and underpaid, and in March 2013 gave four weeks notice of his resignation. When Z asked Mr B what he intended to do after he had resigned he told them he would be working for another company which did not compete with Z but was unable to give any other details other than that.
Mr B took accrued annual leave during the last week of his notice and started work with one of Z's competitors before his employment with Z had ended.
Mr B knew he was subject to a restraint that prevented him from working for any competitor of Z for three months after his employment with Z ended. He purposely avoided giving Z any information which would have alerted it to the fact that he was intending to knowingly breach his restraint of trade.
On May 15, 2013, Z became aware from a number of its clients that Mr B was soliciting work from them. An email sent to clients offered Mr B's services and encouraged them to visit two websites he operated. At least one customer who received this communication had not previously worked with Mr B so naturally Z became concerned that Mr B may have taken its customer database.
Z found out that Mr B was advertising his services as an online marketing specialist of websites. Mr B's websites were advertised in at least five different internet advertising directories and had been while he was employed by Z and while he was subject to Z's restraint.
The website names had been acquired during Mr B's employment with Z. Screen shots of the websites Mr B operated showed they were promoting various services which competed with Z's services, and so it went on.
Z instructed a private investigator to find out who Mr B was working for. It turned out Mr B was employed by a competitor who said that Mr B started working on April 9, two days before his employment with Z ended. The competitor claimed it was not aware of Mr B's post-employment restraints and said it suspended him once it became aware he was working in breach of those restraints.
Mr B met with a representative from Z on May 24 and handed over a lawyer's letter admitting his actions had been in error and handed over a flash drive of electronic documents he had assembled while at Z (which he had deliberately taken with him when he left) together with 50 business cards belonging to Z's customers with whom he had dealings. The documents on the flash drive and the business cards were clearly Z's property and should never have been removed by Mr B. The flash drive contained not just Z's confidential information but the confidential information of hundreds of Z's customers.
Z sought damages from Mr B. It wanted him to account for the income he earned working for third parties arising from his solicitation of their customers and in carrying out private work (both during his employment and during his restraint period). It sought reimbursement of the cost of the private investigator and significant penalties for a number of breaches that it said were deliberately intended to harm Z.
It did not go well for Mr B in the Employment Relations Authority.
The authority member found a number of serious breaches including the finding that Mr B had breached his employment agreement by (among other things) copying, removing and using Z's confidential information for his own benefit, using Z's confidential information to assist a competitor, doing work while he was employed by Z that was in breach of his duty of fidelity, breaching his duty of fidelity while employed by Z by soliciting Z's customers after his employment had ended but while he was subject to a restraint of trade clause and so on.
The authority member found in all 263 breaches of his employment agreement and awarded the employer not only costs of such things as the private investigator but imposed a penalty of $50,000 on Mr B which he was to pay, in full, to Z.
He was also ordered to pay his employer $13,000 towards their costs.
* Mary-Jane Thomas is a partner at Preston Russell Law. She is always interested in ideas for articles. Email her at Mary-Jane.Thomas@prlaw.co.nz.
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