An Employee Has Stolen My Client List. What Can I Do?

As an employer, you may need to share your client list with your employees. This is valuable information. Unfortunately, modern technology has made it easy for employees to take a photograph of a client list or database or forward a copy to their personal email. Your employees will likely have constant access to computers, databases and smartphones during the course of their employment. Because of these risks, you should be prepared to face this issue. This article will outline some questions to consider if an employee takes your client list and what steps you should take next. 

How Confidential Is the Client List? 

Confidential information refers to any information that a business does not wish to make public. This may include anything that has been acquired by or made available to an individual or other legal entity in the course of the relationship between the parties. The more details the stolen client list contains, the greater the potential damage to your business.

For example, a client list that contains more detailed information, such as the prices clients pay for certain services, would be more confidential than a list that only contains client names.

Is There Enough Evidence to Terminate Employment?

Before taking any further steps, you will need to investigate and collect proof that the employee has taken the client list. For example, you may be able to see that they have emailed it to their personal email or taken screenshots. Merely thinking that it may be that your employee has taken your list will typically not be enough to terminate the employee’s employment.

What Terms Exist in the Employment Agreement?

Usually, your employees’ employment agreement will refer to confidential information. The employment agreement can help you determine whether the stolen information was confidential. Even if there is no agreement in place, employees still have legal obligations about confidentiality. However, it is much easier to enforce a breach of confidentiality clause in a written employment agreement. 

What Are My Options?

Protect the information 

Regardless of whether the employee is still employed or no longer with your business, you should try to protect the information that they stole. You can send the employee a formal letter instructing them to:

• return the information;
• confirm they have not shared it; and 
• destroy it if it is still in their personal possession. 

If the employee no longer works at your business, you may need to prepare a letter to inform other businesses or individuals about the theft.

Discipline or Terminate the Employee

Depending on the seriousness of their theft, you may wish to discipline the employee or terminate their employment. Typically, there is a termination clause in the employment agreement. This clause may permit termination if the employee:

• unlawfully discloses confidential information; or
• engages in serious misconduct. 

Employment agreements also often include post-employment non-competition and non-solicitation clauses. This means that even after the employee has left your business, they still have ongoing obligations not to compete with you or steal your other employees or clients. However, it is important to note that even if you have a right to terminate under the employment agreement, doing so may still expose you to an unfair dismissal claim. 

Pursue Legal Action

If the breach is serious and causes significant damage to your business, you may wish to consider legal action against the employee. This can prevent further use or sharing of the information. If you are successful, the court may order the employee to:

• do, or refrain from doing, a specific action (i.e. return the information or stop using it); 
• pay damages for breach of contract;
• pay damages for copyright infringement; and
• compensate you for any legal costs you have incurred. 

Can I Claim Damages?

In order to claim damages, you will have to prove that your business has suffered loss or damage as a result of your employee’s breach. For example, you may be able to prove that the employee has used the stolen client list to poach your clients.

Key Takeaways

As an employer, you should be prepared to deal with the theft of client lists or other important information. Having a clearly drafted confidentiality clause in your employment agreement will help you to enforce the clause. If an employee takes confidential information, you may need to:

• protecting the information;
• discipline the employee or terminating the employment; or
• pursue legal action.

If you need help reviewing any clauses in your employee’s agreement relating to confidentiality or post-employment non-competition and non-solicitation, please contact LegalVision’s lawyers on 1300 544 755 or fill out the form on this page.