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The Corporations Act: Employee Obligations

While company Directors are often familiar with their obligations under the Corporations Act, employees also have their own obligations when it comes to the appropriate use of their position and confidential information.

What is the Corporations Act?

The Corporations Act 2001 (Cth) is the principal legislation regulating companies in Australia. This Act regulates matters such as the formation and operation of companies, duties of officers, takeovers and fundraising.

Whilst it is common knowledge that directors have duties to corporations under the Corporations Act, what is less well known is that employees also have duties to corporations under this Act; including the duty not to use information improperly.

What does the law say?

Sections 182 and 183 of the Corporations Act 2001 (Cth) prohibit the improper use of a person’s position or information (respectively), by directors, officers and employees, to gain an advantage or cause detriment to the corporation.

Section 182(1) of the Corporations Act states:

A director, secretary, other officer or employee of a corporation must not improperly use their position to:

  1. Gain an advantage for themselves or someone else; or
  2. Cause detriment to the corporation.

while Section 183(1) of the Act adds:

A person who obtains information because they are or have been a director, other officer or employee of a corporation must not improperly use the information to:

  1. Gain an advantage for themselves or someone else; or
  2. Cause detriment to the corporation.

Why is this important to a business owner?

Everyone knows the story of the employee who leaves one organisation and takes company confidential information with them; either for their new employer or with the intent of starting up a competing business.

An employer faced with such a situation might consider action against their former employee in the form of breaches of employment contract, fiduciary duties, confidence and…sections 182 and 183 of the Corporations Act.

Does the Corporations Act have teeth?

Sections 182 and 183 are civil penalty provisions: a breach of these sections gives rise to civil liabilities under the Corporations Act. Under The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019, the maximum civil penalty for individuals is the greater of 5,000 penalty units (currently $1.11 million) or three times the benefit obtained and detriment avoided.

The value of a penalty unit is prescribed by the Crimes Act 1914 and is currently $222 for offences committed on or after 1 July 2020.

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