How to Legally Address an Employee Sharing Company Data with Competitors?

My employee has been cheating our company by working for another firm while sitting in my office as a freelancer and sending all data, including vendors, costs, clients, etc., to the other firm. I want to take legal action against him. How can we proceed with this?

We would also like to take action against the company to which the data is being passed. Kindly advise.

You are entitled to take action against the employee, but not for the company. Therefore, you should issue a disciplinary action against the employee detailing the data theft in your company through a show cause notice or memo. Subsequently, you can organize a legal inquiry with the employee in front of an advocate who is a member of any bar council. If the data theft is proven against the employee, you can proceed to issue a termination letter after the inquiry. This is the most severe punishment for an employee from a legal perspective. Terminating an employee without conducting a legal inquiry is not permissible.

Steps to Address Data Theft

To address this issue effectively, follow these steps:

• Issue a show cause notice.
• Conduct a legal inquiry.
• If the data theft is proven, proceed with termination.
• Ensure the settlement of all statutory benefits for the employee.
• Implement a system to prevent such activities in the future.

Thank you and Regards,
Prakash.HR

The above activities are applicable only if you have a standing order in your company with a clear description of misbehavior and its legal action against the employee. You should mention the standing order number regarding data theft in the MEMO.

Thanks & Regards,
Prakash.HR

Do you have any Non-Disclosure Agreement in your firm? What are the current guidelines on access to information and sharing it? For you to file a case against him, you may first need to check the current practices. Please consult your corporate lawyer before you collect any proof and file any case. If your firm doesn't have firm guidelines, a knee-jerk reaction can prove to be costly. Looking forward to hearing from you!

Regards

The procedure and actions suggested by Mr. Prakash above are really appreciated. Before going further, I believe you must answer the following questions to the community:

a) How do you know that the employee is under dual employment and about such an act?

b) Did you get the information about his dual employment from any of your employees, or is there anything you have noticed that makes you feel like he is supplying your company data to other companies?

c) Are you holding a senior/authorized position in your department that helps you to take direct actions?

d) What actions have you taken so far?

e) Have you shared the same with any of your seniors or anyone in your team?

The aforementioned questions are really important and need to be answered so that there is no room for misleading information or communication, and you can get the appropriate solutions or suggestions which will also help others.

I hope the relevant terms and conditions you have included in the appointment letters to prevent or fight this kind of problem, like an NDA (as asked by Ms. [Cite Contribution]).

If you are confident about his actions, I’m hoping that you have perfect material that can prove the same. You can take action against the employee; otherwise, you need to do your homework before going further because it is really important for issuing even a notice to employees in this regard.

To Collect Proof Against Him, You Need to Perform:

- Share the same with his direct reportee/Boss/TL/Supervisor and IT Head immediately.

- Take help from the IT department to know all his computerized activities.

- You can take help from his coworkers secretly (and CCTV cameras if you have them installed in your office premises).

- You can also control his official work and timing with the help of his Senior/Boss/TL/Supervisor.

- The PC/Laptop allotted to the employee can also be accessed by IT people to know about data transmission and reauthorization for personal email and use of other websites.

Subsequently, if you find good and relevant information/proof against him, he can be terminated immediately by referring to the breach of T&Cs of employment, and you need to file an FIR against the same employee for the act, setting an example for other employees too.

Steps for Handling Employee Misconduct

In this case, first, it is necessary to gather evidence and have witnesses. If the enquiry is challenged by the delinquent employee in court and you are not ready with sufficient evidence and witnesses, the case decision can be in favor of the employee.

Also, after the issue of a show cause notice, you need to give sufficient time for him to reply and then issue a charge sheet mentioning the allegations against the employee. You need to appoint a qualified and experienced enquiry officer. If the enquiry officer is not experienced, again the enquiry will be a mess. So please take care of this.

Also, if the charges are proved, you can forfeit terminal benefits like gratuity payable to him on termination if he has completed 5 years of service under Section 4(6) of the Gratuity Act. Please contact if you need any guidance on the matter.

Regards,
Sumeet

Dear Sheetal,
Theft or sharing company information with rivals, and being on the payroll of one company while working for another, are relevant and established acts of misconduct punishable by the current employer. This may also lead to a loss of confidence.

Relevant Issues to Establish

1. Whether the employee has been working for another company without permission/authorization from your company, which could establish the charge of double employment.

2. Whether the employee has been passing on all data, including vendors, costs, clients, etc., to another firm, which could lead to two additional charges.

After meticulously working out the above, please issue a Show Cause notice, followed by a charge sheet, and conduct an inquiry through a competent Enquiry Officer. Allow the employee to present their side of the story/evidence for rebuttal, and take appropriate action accordingly.

If the above charges are proven, the charge of loss of confidence may be sufficient to bypass the need for an inquiry, but I recommend proceeding with one to be on the safe side.

Regards,
S.K. Johri