Update Your Bag-Search Policy before Selling your Business

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Your Business Sale

Getting a business ready for sale can be a big deal. Properly advised, the vendor prepares the business by (amongst other things) putting in place all the internal arrangements (including appropriate legal documents) that a purchaser would like to see.

Oral Supply arrangements?

Oral supply arrangements, contracts with key clients which consist of a string of emails and conversations and other “loose ends” not only have the potential to unravel into a nightmare, but also act as a “red flag” to genuine purchasers.

The vendor’s relationship with its employees is no less important. Whilst many business owners acknowledge the benefit of written employment contracts and also written employment policies, the question then becomes: What should they talk about? One thing they should include is an up to date bag–search policy.

The Modern Day Bag Search – What is it?

A hot topic for employee policies at the moment is the limitations of the modern-day bag search.

The changes that technology has made to how businesses function, also extends to what people bring to work. The mobile phone is now a fundamental tool for many workers and at the very least, an accessory that is brought to work each day and used at work.

Even though confidential information of the employer is often stored on or accessed by use of a mobile phone which belongs to the employee, this does not change its inherent character as being the property of the employer.

Corporate Information

What steps can an employer take to prevent an employee from misappropriating corporate information which may be accessed on the employee’s mobile phone?

An employer cannot compel the production and inspection of a mobile phone or any other physical property of the employee unless they have a right to do so under the contract of employment or workplace IT policy or where it is a reasonable and lawful instruction.

With technology changing so rapidly, most employers opt for its inclusion in a workplace IT policy that can be changed as and when required. But what should it say?

The cases indicate that if an employee uses a phone or other device for work purposes or to access corporate IT systems (include Wi-Fi and corporate emails) then a right of inspection to ensure appropriate use is acceptable.


What about investigations into misconduct? Can an employer inspect mobile devices in these in circumstances? The answer is yes, if the employment policy is incorporated into the employment contract by reference, and if the employer has consulted with the employees affected at the time of introducing the policy and if the policy itself is reasonable in that the right of inspection is limited to the misconduct alleged.

Suspicion of misconduct

A recent example of where a right to inspect was challenged by the employee related to a situation where the employee was strongly suspected of using their mobile phone to save client information and to take photos of screens and illicitly contacting another employee. The court held that the employee’s demand for access to the employee’s mobile phone was reasonable.

Workplace Health and Safety

If the employer has reason to suspect a breach of workplace health and safety or anti-discrimination laws it may have a legal obligation to investigate and remedy the breach. It would be foolish and embarrassing for an employer to find themselves with such an obligation, but no right (as regards inspecting mobile devices) to fulfil the obligations, because its policies and procedures were inadequate.

Privacy Act

In most (if not all) cases, an employee’s personal device will contain personal information as defined in the Privacy Act. If the employee’s turnover is more than $3m, then the employer must (as regards the personal information) comply with the Australia Privacy Principles (APPs). So if the employer does have a legal right of access, they should make sure they comply with the APPs.

Such compliance should not prevent an employer from conducting a robust disciplinary investigation into alleged employee misconduct however, as the Privacy Act allows for the collection or use of information where a company “has reason to suspect unlawful activity or misconduct of a serious nature” and reasonably believes that the collection or use is necessary to take appropriate action.

Inspection and collection without employee’s knowledge

Indeed in a recent case, the court said that this exception extended to not only collecting personal information as needed for a misconduct investigation but also that the collection could be undertaken without the individual’s knowledge.

Other Laws

Other legislation also applies. In NSW, it is prohibited to carry out surveillance of an employee without prior notice in writing and a policy is also required for computer surveillance – Workplace Surveillance Act 2005 (NSW).

Moreover, employers must also notify employees of any listening to or recording of communications in the workplace such as phone calls or emails-Telecommunications (Interception and Access) Act 1979 (Cth)

Maximise the sale price for your business and get your employment policies up to date now.

Call Leigh Adams if you have any further queries on 02 9570 7844.

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