Confidentiality agreement with an employee: when do you need it and what does it need to contain

Quick overview

• A non-disclosure agreement with an employee is particularly useful when the employee works with non-public information that could cause harm to the employer if leaked.
• Typically, this includes trade secrets, know-how, quotations, technology processes, marketing plans or customer databases.
• The agreement should say exactly what information is confidential, to whom the employee may not disclose it, how it is to be handled, when confidentiality does not apply, and whether it continues after employment ends.

Do you need to set up confidentiality agreements so that they are not too general or unenforceable? Have an employment contract or separate confidentiality agreement prepared or reviewed by an attorney.

Do I need to enter into a confidentiality agreement?

Generally, the duty of confidentiality for facts that come to the employee’s attention in the course of his or her employment applies only to public sector employees. Typically, this includes civil servants, police officers, employees of municipal or regional authorities and so on.

However, if a private employer wishes to bind its employee to confidentiality, then it must enter into a contract or confidentiality agreement with the employee. The employer cannot unilaterally impose a confidentiality obligation on its employees merely by means of an internal regulation, and it would not be possible to impose any penalties on the employee in the event of a breach of such an internal regulation.

The employer could only specify the already agreed confidentiality obligation by means of an internal regulation, but not unilaterally establish it. The confidentiality agreement itself may be contained in the employment contract or a separate confidentiality agreement may be concluded. The latter would deal only with issues related to the employee’s obligation to maintain confidentiality of precisely defined information.

In practice, it is often the case that employers only have confidentiality provisions in an internal directive or in one general sentence of the employment contract. The problem only arises when the employee leaves for a competitor or takes the client database. Then it turns out that the document does not say precisely enough which information was protected and how the employee should have handled it.

What the confidentiality agreement should contain

Practical example: A small technology firm wanted to protect not only the source code, but also how contracts were priced and a non-public list of key clients. The original model agreement spoke only of “all information obtained in the course of the work”, which was too broad and impractical. It was more appropriate to divide confidential information into specific categories and to add rules for handling documents, access to systems and return of documents after termination of employment.

In particular, the confidentiality agreement should contain a definition of the information to be protected and kept confidential, or which must not be disclosed by the employee to a third party. This will include, for example, the employer’s trade secrets, know-how, pricing policy or other information that is not publicly available and in whose confidentiality the employer has a legitimate interest.

For trade secrets, it is appropriate to follow the Civil Code: the protected information should be competitively important to the company, identifiable, valuable, not generally available and the employer should actively ensure its confidentiality. It is therefore not enough to simply write that “all information is confidential”.

The agreement should describe in practical terms whether the information is, for example, price lists, customer databases, manufacturing processes, source codes, business strategies or internal methodologies.

Conversely, an overly general specification covering all information that an employee learns in the course of his or her work could be considered too vague and unenforceable.

It is also appropriate to define in the agreement the cases in which the employee will not be bound by the confidentiality obligation, in particular where the information is publicly available or where the employee will be obliged to disclose such information upon a court order.

It is therefore not recommended to use the free downloadable templates for confidentiality agreements, as they can never contain a precise definition of the important topics that should be included in the agreement. By using a template confidentiality agreement, you run the risk that it could be invalid or not provide sufficient protection for all the information you want to protect in your business.

Employee responsibility

What consequences can an employee suffer if he or she breaches the duty of confidentiality? Primarily, the employee will be obliged to compensate the employer for the damage caused by the breach of this obligation. This may include, but is not limited to, lost profits.

However, it should be noted that it may be quite difficult to quantify the amount of the damage. Breach of the employee’s duty of confidentiality may also be grounds for dismissal by the employer.

Here, however, it will be necessary to assess the significance of the disclosed facts, the position of the employee and the circle of persons to whom the information was disclosed and, if applicable, other relevant circumstances in order to determine whether it is possible to proceed directly to termination.

Whether a breach of confidentiality will justify dismissal or even immediate termination of employment cannot be stated in a blanket manner. It always depends on the nature of the information disclosed, the degree of culpability, the consequences for the employer and the employee’s job title.

However, it is not possible to negotiate a contractual penalty in the event of a breach of confidentiality by an employee, which is generally prohibited by the Labour Code. Therefore, no fines or financial penalties can be imposed on an employee for breach of confidentiality.

It is precisely the consequences of a breach of confidentiality that merit caution. In an employment relationship, a contractual penalty cannot simply be copied from a model commercial contract. If you want to get the agreement set up correctly, we will check that it complies with the Labour Code while protecting your business interests and modify it if necessary.

Post-employment confidentiality agreement

An employee’s obligation to maintain confidentiality about certain facts can apply both during the employment relationship and after its termination. Here, it will depend solely on the agreement between the employer and the employee as to the duration of the post-employment confidentiality obligation.

Even in the event of a breach of the post-employment confidentiality obligation, the former employee will be liable for the damage he or she caused to the employer by disclosing the information.

If you would like to draw up or review a confidentiality agreement, in accordance with the Civil Code of course, get acquainted with our offer.

Summary

A non-disclosure agreement with an employee is appropriate whenever the employee is working with non-public information whose leakage could harm the employer. A private employer should not rely solely on an internal regulation, but should negotiate confidentiality directly in the employment contract or in a separate agreement. The document must precisely define the protected information, the rules for handling it, the exceptions to confidentiality, the duration of the obligation and the consequences of a breach. An employee cannot normally negotiate a contractual penalty for breach of confidentiality, but the employer can deal with damages and, in serious cases, termination of employment. If the confidentiality agreement is to protect really important know-how, client data or trade secrets, it is worth preparing it individually according to the specific position and risks.