Misuse of Employers Information Costs Employee Millions

It’s something employers everywhere worry about; an employee uses their customer details and other business information for their own financial gain which also negatively impacts their business.

In one case recently the Employment Relations Authority found an employee, Michael Mitchell, had breached his duty of good faith and fidelity to his employer, Nova Energy.  Mr Mitchell had uploaded a client list and rates onto a USB drive prior to resigning from his role.  He then went on to use the information in a competing business that he set up, called National Energy Limited (NEL).

He was able to determine which of Nova Energy’s clients were paying high margins, who had a recent contract and who was near the end of a contract.

Nova was able to provide the Authority with calculations of their losses related to Mr Mitchell’s activities which totalled slightly more than $1m annually.  Nova claimed that Mr Mitchell should pay this amount, as damages, for a projected 10 year period.

The Authority reduced the period to 7 years, taking into account relevant discount factors.  However, they also ordered Mr Mitchell to pay a penalty of $30,000 and his company, NEL, to pay a penalty of $50,000, to Nova Energy.  This was in part due to the deliberate nature of Mr Mitchell’s actions, and for NEL, it was because they aided and abetted the breaches made by Mr Mitchell.

It is perhaps worth noting that Mr Mitchell did not have a restraint of trade agreed with his employer.  We sometimes see clients request a strong restraint clause for an employment agreement to address concerns such as those noted in this case, but often it’s other clauses that provide the desired protection, such as confidential information requirements and non-solicitation wording.  Do talk to us if this is something you would like to check for your business’s employment agreement templates.

This employment information is supplied by Chapman ER – www.chapmaner.co.nz 

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