Confidentiality Clauses in Employment Contracts

Confidentiality clauses protect a business's sensitive information during and after employment.

Implied Duty vs Express Clause

Implied Duty (Automatic)

All employees have an implied duty to:

• Not disclose confidential information during employment
• Not use confidential information for personal gain
• Act in good faith toward the employer

Limitation: After employment ends, the implied duty only covers trade secrets, not general confidential information.

Express Confidentiality Clause

A written clause provides:

• Clear definition of what's confidential
• Protection beyond trade secrets
• Extended duration after employment
• Specific remedies for breach

What Can Be Protected?

Trade Secrets (Highest Protection)

• Secret formulas or recipes
• Proprietary manufacturing processes
• Source code and algorithms
• Research and development data

Trade secrets are protected indefinitely, even without a written clause.

Confidential Information

• Customer and supplier lists
• Pricing strategies
• Business plans
• Financial information
• Marketing strategies
• Employee information

Requires express clause for post-employment protection.

Information That Cannot Be Protected

• Skills and general knowledge gained
• Information already public
• Information received from third parties
• Information required by law to disclose

Drafting an Effective Clause

Define Confidential Information

Be specific about what's covered:

"Confidential Information includes but is not limited to: customer lists and contact details, pricing information, business strategies, financial data, technical specifications, and any information marked as confidential."

Scope of Obligations

Specify what the employee must and must not do:

"The Employee shall not, during or after employment, use or disclose any Confidential Information to any person except as required for their duties or with written consent from the Company."

Duration

State how long obligations last:

"The obligations in this clause shall continue for a period of [2-5] years following termination of employment, except for trade secrets which shall be protected indefinitely."

Exceptions

Include necessary carve-outs:

"These obligations do not prevent disclosure required by law, court order, or regulatory authority, or disclosure of information that becomes publicly available through no fault of the Employee."

Whistleblowing Protection

Confidentiality clauses cannot prevent employees from:

• Reporting criminal activity to authorities
• Making protected disclosures under whistleblowing law
• Reporting health and safety concerns
• Reporting discrimination or harassment
• Disclosing to legal advisers

Any clause that attempts to prevent protected disclosures is void and unenforceable.

Enforcing Confidentiality

During Employment

• Verbal warning
• Written warning
• Disciplinary action up to dismissal
• Injunction to prevent further disclosure

After Employment

• Send cease and desist letter
• Seek interim injunction
• Claim damages for losses
• Account of profits

Remedies for Breach

Remedy	Purpose
Injunction	Stop ongoing/threatened disclosure
Damages	Compensate for losses suffered
Account of profits	Recover gains made by former employee
Delivery up	Return of confidential materials

Practical Protection Steps

Beyond the contract clause:

1. Mark documents as confidential
2. Limit access to need-to-know basis
3. Use NDAs with third parties
4. Secure systems with password protection
5. Exit procedures to recover materials
6. Remind leavers of ongoing obligations