Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
Employment & Labour Law (2nd Edition)
An employer can require an employee to keep information related to the employer confidential after the termination of employment by:
- providing a non-disclosure agreement in an employment contract; or
- mutually making a non-disclosure agreement separately from an employment contract with an employee.
However, a non-disclosure agreement is subject to Unfair Contract Terms Act. A non-disclosure agreement may be deemed to be an unfair contract term if the court consider that such agreement causes excessive restriction of rights, freedom and burden to an employee (e.g. agreement with unlimited binding period). A non-disclosure agreement which is deemed to be an unfair contract term shall only be enforceable to the extent that they are fair and reasonable according to the circumstances.
The law requires workers to keep an employer’s trade secrets confidential after the termination of employment. Employers can only require workers to maintain the confidentiality of other types of confidential information, after the termination of employment, by express contractual agreement. Most contracts of employment contain an express obligation to protect identified categories of confidential information after employment as only limited types of confidential information fall into the category of trade secrets and it can be difficult to identify these.
Yes. At common law, as a general rule, an employee may leave employment and lawfully compete against his or her employer (unless the employee is a fiduciary or is bound by a non-competition agreement), but the employee may not take or use against the employer any of the employer’s trade secrets, confidential information or customer lists, whether during or after employment.
Further, employment agreements often contain covenants with respect to the employer’s confidential information and intellectual property that apply post-employment. Separate confidentiality agreements may also be entered into between the employer and employee which serve the same purpose.
An employer can require a worker to keep information relating to the employer confidential through a confidentiality clause. The latter, freely entered into by the parties in an employment contract, creates an obligation that has the force of law between the parties and should be complied with in good faith.
Yes, including confidentiality undertakings within the framework of employment agreements/separation agreements which apply following termination of employment is very common.
Information relating to the employer’s business is protected by the Act on the Protection of Trade Secrets. The Act defines a trade secret as information concerning the business or industrial relations of a person conducting business or industrial activities, which that person wants to keep secret and which the divulgation of is likely to cause damage as regards competition. An employee who wilfully or through negligence exploits or reveals an employer’s trade secret of which the employee has been informed during the course of the employment under such circumstances that the employee understood, or ought to have understood, that the employee was not allowed to reveal it, shall compensate the damage caused by the action. This only applies after the expiry of an employment if special reasons are at hand, e.g., if the former employee immediately starts working for a competitor and uses trade secrets belonging to the former employer in the new employment.
Further, an employer may require the employee to enter in to an agreement of confidentiality. This may be included in the employment agreement as a provision or as a separate agreement.
Yes, an employer can seek to do so by an express contractual term subject at all times to the information retaining its confidential quality and the employee not being prevented from disclosing such information as required by law, for example, in the case of whistleblowing to a relevant statutory regulator. A confidentiality clause is a type of restrictive covenant and must therefore be capable of being considered reasonable with regard to what it seeks to protect. Employers should specify in writing the type of information that that they are seeking to keep confidential.
Yes, employees are obliged not to disclose any confidential information after termination of the employment relationship. Covered by this obligation are trade and business secrets and also confidential information which the employer has marked as confidential for the company’s interest.
Confidentiality covenants are admitted under French law. Based on existing case law, the only potential matter for discussion relates to the necessity to limit the duty in time.
As a general rule, the employee has a statutory obligation to keep the employer's trade and business secrets confidential only during the term of employment. If the employee has obtained such information unlawfully, the prohibition continues after termination of the employment.
Employer may require a worker to keep information relating to employer's trade and business secrets confidential also after the termination of employment. The parties may agree that the confidentiality obligation remains in force also after the termination of employment. However, the agreement shall not restrict the employee's fundamental right to work and the freedom to engage in commercial activity too excessively.
The worker is obliged to keep the information related to the employer confidential after the termination of employment, if such information falls into the scope of trade secrets as defined in the Anti-Unfair Competition Law of the PRC (utilized technical and business information which is unknown by the public; may create business interests or profit for its legal owners; and is maintained secrecy by its legal owners).
However, in practice, many employers choose to enter into a confidential agreement/clause with his employees, making clear the definition and scope of the company’s ‘trade secrets’ and the confidentiality duty of the employees to reduce the potential legal risks.
Employment law foresees that an employee cannot, during the contract and after its termination, disclose manufacturing or business secrets, or personal or confidential information he is aware of because of his employment.
Confidentiality agreements can relate to certain confidential information (as agreed by the employer and the employee) gained by the employee during the course of employment. Such information may be broader than the information that would otherwise be protected under an implied term or in equity. Under Austrian law the protection of trade secrets and confidential information is, in principle, regulated by the Austrian Act against Unfair Competition, the Austrian Data Protection Act and the Austrian Criminal Code. Confidentiality clauses generally remain in force whilst the information protected remains confidential. This means that the clause may apply during employment and potentially long after the employment relationship ends.
Employers can and commonly do require a worker to keep information relating to the employer confidential after the termination of employment, through contractual agreement. In addition, in May 2016, former President Obama signed into law the Defend Trade Secrets Act (DTSA) providing companies, for the first time, a federal private action for misappropriation of trade secrets. Although there were already similar state remedies in place, given the uncertainty of protection from one state to another the DTSA significantly enhances protection of trade secrets across multiple jurisdictions. The enactment of the DTSA resulted in an escalation in litigation centered on alleged trade secret misappropriation, in particular in the technology industry. In addition, large jury awards in recent trade secret misappropriation cases have helped what was once an underused cause of action, become an effective tool for protecting trade secret information in the digital age.
The DTSA does not preempt state trade secret laws, and state courts and state law remain an option for victims of trade secret misappropriation. With its federal forum and federal remedy, the DTSA, will over time create a nationwide body of law and provide a degree of predictability for company litigants. Remedies under the DTSA include civil seizure, an injunction, and an award of monetary damages. The court may award damages (i) for actual loss caused by misappropriation of the trade secret, (ii) for any unjust enrichment caused by misappropriation of the trade secret, and (iii) measured by a reasonable royalty for the unauthorized disclosure or use of the trade secret.
According to art. 321a para. 4 of the Swiss Code of Obligations the employee must – after termination of employment – not exploit or reveal any confidential information obtained while in the employer's service such as manufacturing or trade secrets insofar as this is required to safeguard the employer's legitimate interests.
Within certain limits, the parties are furthermore free to intensify this statutory duty of confidentiality.
Yes. The common law protects confidential information. Employers also frequently require their employees to expressly agree to protect their confidential information under the employment agreement.
Yes. Most written employment agreements contain a clause expressly setting out the obligations of an employee in respect of confidential information following termination.
In the absence of a contractual provision, an implied duty not to disclose confidential information survives the termination of an employment agreement, but in a restricted form. Information which is of a sufficiently high degree of confidentiality as to amount to a trade secret will be subject to an ongoing duty not to use or disclose the information.
The determination of what constitutes a trade secret is determined on a case-by-case basis having regard to the nature of the employment, the nature of the information, whether the employer impressed upon the employee the confidential nature of the information; and whether the relevant information is easily isolated from other information which the employee is free to use.
The FLL provides that any waiver of employee’s rights is null. However, it is relatively common to find negotiations when terminating an employee, where the parties agree on an amount below the amount resulting from the mandatory severance. While an employee’s statement waiving his/her right to severance would be unenforceable, in practice, the parties will enter into a mutual agreement to terminate the employment, agreeing on a lump-sum amount that is not referred to as severance, but as an “extraordinary compensation” or “gratification”. Normally, the aforementioned concept is a portion of what would otherwise be full severance under the FLL.
The agreement reached between employer and employee, in order to be binding, must be personally ratified before the Conciliation and Arbitration Labour Board.
Yes, it is possible and legal to enter into a confidentiality agreement with an employee after termination of employment. The violation of this type of agreement may give rise to a claim for damages against the former employee or even a criminal action. It is important to establish in detail the information that will be considered confidential, as not everything may be regarded as confidential under Mexican law.
According to section 2105 of the Italian Civil Code each employee – whatever is his/her job title or category – must "nor divulge information pertaining to the organization and method of production of the enterprise, nor use it in such a manner as may be prejudicial to the enterprise". Therefore, the confidentiality obligation automatically follows the employment relationship.
For post-termination period, the parties might enter into a confidentiality agreement. However, it would be advisable to duly specific all the information that should be kept confidential as a too general clause might render the agreement difficult to enforce.
An employment contract may contain provisions imposing on the employee to keep confidential any information relating to employer, during and after the termination of the employment relationship.
Yes, they can.
Yes. To avoid any doubt, employers should stipulate in their work rules, and ideally in a separate agreement with each employee, that the employees owe a confidentiality obligation not only during employment but also after the termination of employment. Also, employers are recommended to provide a clear definition of confidential information in the work rules or the agreement, in order to provide guidance to the employees and help uphold the enforceability of the confidentiality provision in case there is a breach.
Confidential information of the employer can be protected even in the post-employment period. A clause which prohibits the employee from disclosing commercial and trade secrets is not restraint of trade as the intention is to protect legitimate interests in relation to the business of the employer. Restraining use of trade secrets during or after cessation of employment does not result into ‘restraint of trade’ under Section 27 of the Contract Act and therefore, can be enforceable under certain circumstances. However, such a clause should not restrict the employee from carrying on any lawful trade, occupation or business.
The courts in India have generally held that while employees may be restrained from using the employer’s confidential information and trade secrets after termination of employment, such a bar cannot apply in respect of knowledge available in the public domain or which was self-acquired during the course of employment.