Employee departures can open the door to compliance, data security and reputational risks. Here’s how HR can strengthen employment contracts and tighten their offboarding processes to reduce exposure and protect the business.

Whether they are voluntary or employer-initiated, employee departures often carry legal risk for employers. The period between notice being given and the final day of employment can be particularly sensitive.

As HR practitioners know well, some of the most common risks to look out for when an employee exits the organisation relate to them retaining company property, such as laptops, phones or sensitive documentation.

“Another [issue] is regulating an employee’s post-employment activities – restricting them from going to join a competitor for a period of time, restricting them from soliciting clients or staff, and making sure there’s no misuse of confidential information,” says Lauren Brouwer-French, Senior Associate at Harmers Workplace Lawyers.

A recent dispute in the US shows how high the stakes can be in these scenarios. Late last year, a former employee of technology company Intel was accused of stealing more than 18,000 confidential files in the period between being made redundant and his final day with the company. He is now facing a US$250,000 lawsuit from the company.

Cases like this illustrate the importance of treating offboarding as a compliance exercise rather than an administrative process. 

Below, Brouwer-French unpacks the practical steps employers can take to protect their business during employee exits.

Contract terms that mitigate risk during employee departures

Employers are protected from misuse of confidential information to some extent under the Corporations Act and through equitable principles, says Brouwer-French. However, clear and comprehensive employment contracts remain employers’ strongest and most reliable line of defence.

“It is recommended that you have clauses within the contract that address these issues, because they can go further than [those] protections,” she says.

This was made clear in a recent Supreme Court case where a former property manager transferred confidential data to personal devices and cloud accounts around the time she left to join a competitor. The employer sought urgent orders to restrain any further disclosure and recover the material.

Although the manager’s contract did not include a post-employment non-compete clause, it did contain clear confidentiality provisions. As a result, the court found the employee had “misuse[d] this confidential information without [the employer’s] consent” and ordered its return.

The specific contract terms needed will vary depending on the business, says Brouwer-French, but there are several core protections employers should consider including in employment contracts:

• Returning company property: “It’s really important to have clauses that make it clear that company property and confidential information must be returned to the employee at the end of employment,” she says. 
• Assigning intellectual property to the employer: “There [should] also be clauses that properly assign intellectual property to the employer once the relationship ends, and clauses that make clear that an employee has ongoing obligations relating to confidential information after their employment comes to an end.”
• Right to inspect an employee’s device: In some cases, it can be helpful to have a clause that allows for inspection of an employee’s device at the end of the employment relationship to make sure they don’t have any confidential information stored there.
• Prohibit disparagement: Employers should consider having a clause that specifically bans disparagement of the employer after the relationship comes to an end.
• Non-compete clauses: Some employers may also choose to include post-employment restrictions such as non-compete clauses in contracts to prevent an employee from joining a competitor or soliciting clients.

However, Brouwer-French warns that non-compete clauses are not enforceable unless an employer can prove they are reasonably necessary to protect legitimate business interests. What’s more, from 2027, the government plans to ban non-compete clauses for most workers earning under $175,000 per year.

Using the offboarding process to reduce risk

Particularly in cases of redundancy or difficult departures, offboarding should be treated as an active risk management exercise.

“Once notice of termination is given by either the employee or the employer, employers should consider whether they have a contractual basis to immediately place the employee on a period of ‘gardening leave’, meaning the person is still an employee of the business, but they’re not expected to perform their usual employment duties for the duration of their notice period,” says Brouwer-French.

“That starts to mitigate the amount of ongoing confidential information that somebody has access to, or the amount of interaction that person is having with clients.”

She also recommends writing to the employee to remind them of any terms in their employment contract related to confidentiality and post-employment conduct.

Finally, a structured offboarding checklist can help ensure nothing is overlooked. This might include items such as:

• Confirming what company property the employee holds (e.g. laptops, phones, access cards, hard copy documents) and documenting their return (ideally, this has been captured on an asset register prior to being given to the employee).
• Reviewing what systems and confidential information they have access to
• Disabling or limiting access to key platforms where appropriate
• Obtaining written confirmation that all confidential information has been returned or deleted.

Structured exit procedures won’t eliminate risk entirely, but they can significantly reduce the likelihood of a departure turning into a dispute, says Brouwer-French.

In an era of mass restructures, long-term security will therefore depend on treating offboarding with the same care and rigour as onboarding.

All information, content and materials available on this site are for general informational purposes only. The contents of this article do not constitute legal advice and should not be relied upon as such.

If you suspect an employee has engaged in misconduct, what should you do next? AHRI’s Investigating Workplace Misconduct course can provide some answers.