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One expensive download: Matthew Dearing highlights an ERA case where an ex-employee's data download had severe repercussions.

Employees can face severe repercussions for taking an employer's confidential information when leaving employment, even if they do not use the information, as demonstrated in the recent case of TAG Oil (NZ) Ltd v lames Watchorn at the Employment Relations Authority.

Watchorn worked in New Plymouth as a production/facility manager for TAG Oil from April 2011 until his resignation in July 2012. After his resignation, the company took action against him, claiming he had breached express and implied terms of his employment agreement.

TAG'S claims related to Watchorn's copying of a large amount of data (approximately 350,000 documents) from the company's computer server and taking that data when he left to work for a competitor. Much of the data was saved to an external hard drive owned by Watchorn and included highly confidential and commercially sensitive information.

The breaches of express terms related to copying confidential information to his personal hard drive, removing the hard drive containing that information from TAG'S offices and failing to return it on his resignation. The company also claimed he had breached implied terms of fidelity not acting in the best interests of his employer, and breached the implied term of trust and confidence.

TAG sought a compliance order and injunction in relation to Watchorn's breaches of his employment agreement as well as general, special and exemplary damages for the breaches.

Watchorn admitted to having a substantial quantity of data stored on his personal external hard drive, some of which derived from his employment with TAG.

He claimed he used the hard drive as a backup for whenever there were server issues in the office. Watchorn defended his actions, saying he had previously worked at other energy companies and had made a habit of backing up documents to use as templates or precedents for future work. He believed he was entitled to do so. He also claimed that at the time he left TAG taking his external hard drive, he wasn't aware of the scale of the information he'd downloaded. He said he did a "gross data dump" which entailed dragging files across for downloading from TAG'S computer server and was unaware the company's geotechnical information was included. He argued that the inclusion of this information was inadvertent and unintentional.

TAG'S COO told the Authority that the oil and gas industry was fiercely competitive and geotechnical information would be of incalculable value to a competitor such as Watchorn's new employer--although there was no evidence that Watchorn had transferred it.

He said any damage caused by a leak of information could take years to become apparent.

The Authority did not accept Watchorn's explanations, stating that his claim not to have known the TAG files he worked on during his employment were his employer's property was "unconvincing". It was simply not credible that someone who'd spent nearly 20 years working in the competitive oil industry could have the level of ignorance Watchorn professed to have about confidentiality and ownership matters in relation to information.

The Authority also determined that Watchorn's belief that he was entitled to take templates and to have routinely taken this information from previous employers did not explain why he executed the gross data dump; and that this data dump involved the downloading of approximately 350,000 documents when Watchorn admitted that only 1,000 would have been templates. The Authority also found Watchorn's answers to be inconsistent, undermining the credibility of his evidence.

TAG sought special damages of $75,285 to cover the costs of investigation into Watchorn's actions, as it had to engage a computer forensic analyst and lawyers. The Authority considered it reasonable for Watchorn to pay special damages of $65,567, comprising $11,050 for the computer forensic work and $54,517 in legal fees.

While the Authority declined to award any exemplary damages, it did award penalties against Watchorn as a punishment for his unlawful behaviour and to act as a deterrent. The penalties totalled $12,000, half of which was to be paid to TAG, the other half to the Crown.

This case illustrates that employees will be held to account in circumstances where they take confidential information with them when leaving employment, even if that information is not used. It also demonstrates there can be severe financial consequences for employees in such circumstances.

Matthew Dearing is a solicitor at EMAlegal, Employers and Manufacturers Association (Northern) Inc, and member of the Auckland District Law Society's Employment Law Committee.
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Author:Dearing, Matthew
Publication:NZ Business
Geographic Code:8NEWZ
Date:Aug 1, 2014
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