The use of contingent labour comes with myriad benefits. Among these is flexible and on-demand access to professionals and experts. However these contingent workers often have access to an organisation’s most precious resources, including trade secrets, intellectual property, confidential information and direct contact with customers.
Elizabeth Aitken, a specialist in Employment, Industrial Relations and Workplace Safety law at TressCox Lawyers, and upcoming speaker at Contingent – Rise of the freelancer, says there is a growing need for legal safeguards around the use of non-permanent workers. This week we talked to Elizabeth about why this is such a relevant topic now, what to do when you think an employee is stockpiling your confidential information, the Uber case, and how to avoid contingent risks from the get go.
On why mitigating contingent risk is so relevant now
Over the past decade there has been a considerable increase in demand by organisations for flexible workers, as they offer the ability to upscale and downscale, staff projects at short notice, and access things like external expertise. However, by the very nature of these workers, they can easily contract with or be assigned to multiple organisations.
One of the obvious legal risks we see arise from these engagements is the transportation of commercial know-how, or other business resources. For instance, we see the transportation of information that relates to business designs or methods, marketing campaigns and client information. The risks this presents for the service providers may include damaging the relationship with the host client, and the worker putting the information to use working for themselves. For the host, trade secrets could make their way into the public domain, and confidential information may be used by competitors.
When you should involve a lawyer
The best mitigation of legal risk starts at the very beginning. Often the problems arise when the contracting parties haven’t put these safeguards in place at the start. For instance, the terms of contract between the service provider and the host haven’t been set out in writing and an issue arises regarding the delineation of responsibility between the parties, what is constituted as confidential information or intellectual property and how that information can be treated.
What to do when you identify a risk
The organisation should immediately respond if a concern arises regarding a worker misusing confidential information. For instance, if it comes to your attention that one of your contingent workers is printing off reams of material that they shouldn’t need access to, the organisation should:
- require the worker to attend a disciplinary meeting to discuss the proposed use of the confidential information;
- notify the service provider of the identified risk; and
- apply any relevant terms of contract or policies in responding to this issue.
Ultimately if they have the confidential information in their keeping, and you suspect that they’re imminently going to use this material, then there are legal avenues that you can activate. This can be costly, and is in many instances avoidable by implementing simple safeguards.
On what Elizabeth is seeing as the contingent workforce grows
In line with the growth of the contingent workforce, we’re seeing increasing attention paid to the laws that regulate contingent workers. For instance, the RCSA has recently published a draft industry code which it hopes will regulate the activities of employment service providers. Interestingly, the Code prohibits the transmission of confidential information from contingent workers to service providers. This shows that the handling of confidential client information is an industry wide concern.
In our experience, unfortunately, most clients come to us once something has gone wrong. They’ll have an issue with the characterisation of a contingent worker, an underpayment or the misuse of their confidential information. It’s at this stage that we often see organisations are coming to us for advice and assistance in resolving the issue.
We’d like to see more organisations putting these safeguards in place from the beginning, in order to mitigate the risk of such issues arising.
How do you get it right from the beginning?
Ultimately, service users can take very simple steps to mitigate the risk of misuse of confidential information. We’ll be discussing these at my session at Contingent – Rise of the Freelancer. For instance, points we’ll address include:
Will the contingent workers have access to commercially sensitive information?
What undertakings does your service provider require from their workers in handling their client’s information?
When engaging with a service provider, do you have appropriate terms of contract in place?
Do these terms define confidential information and intellectual property?
What are the expected standards in performance and service delivery?
Is there a clear delineation of responsibility between the service provider and the user?
Whether there is a confidentiality agreement in place that the host requires contingent workers to sign, prior to commencing work with the organisation?
Does your agreement with workers and/or the service provider specify what should happen when the relationship is concluded and the consequences of breach?
We will also cover some broader topics – how to implement restraints of trade, and how this may restrict your direct engagement of a worker previously with your service provider.
The Uber case
The Uber case is a highly-publicized example of a standard issue that can arise with the use of contingent workers – the question of whether a worker should properly be characterised as a contractor or employee.
The distinction between a contract of employment and a contract for services is very often blurred. Like that applied in the Uber case, Australian law requires satisfaction of a multi-factor test examining things like the principal’s ‘control’ over the worker and method of remuneration.
In most cases, as in this, the implications for the principal organisation will be costly and far-reaching.
On the law keeping up with the changing world
At present, the area of contingent work is largely unregulated. However, in recent times, greater attention has been directed to common legal issues arising in the use of non-permanent workers, in particular by the Fair Work Ombudsman. The RSCA Code is a clear response to the prevalence of misclassification cases and we can expect to see further law reform activities in this and other areas related to contingent work.
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