Confidentiality ⚓︎

What information is confidential? Ultimately, this is for each employer to determine having regard to the work they do and the industry or sector in which they operate. Typically, confidential information may include customer or client lists, business plans, financial information, supplier details, terms of business, pricing strategies, product information and know-how, technical data and specifications, software, other intellectual property and trade secrets.

The duty of confidentiality is implied by law into every contract of employment. This duty is a key component of the implied requirement of all employees to act in good faith during their employment and not to compete with their employer’s business. This is sometimes regarded as the employee’s part of the implied mutual duty of trust and confidence, which is the cornerstone of any employment relationship.

What information can be protected? ⚓︎

The starting point, where there is no confidentiality clause in the contract of employment, is that during employment, the employee shall not reveal to a third party any of the employer’s confidential information, courtesy of the implied duty of confidentiality. ‘Any confidential information’ is fairly wide. It covers information which by its nature is intrinsically confidential (for example, a list of customers or clients), information which has been impressed upon the employee as being confidential, or trade secrets. Trivial or mundane information, or information that is publicly available, cannot be designated as confidential information. If the confidential information is highly confidential or unique, employers should consider whether the product, method or other creation or work requires intellectual property protection. An express clause can clarify what exactly the employer regards as confidential during employment, and explain the restrictions in relation to it.

Alarmingly for employers however, post-employment only trade secrets and highly confidential information equivalent to a trade secret can be regarded as confidential. An express clause can also be relied upon post-employment and again can clarify what exactly the employer regards as confidential. However, as discussed in more detail below, an express clause cannot operate to increase the type of information which can be treated as confidential post-employment and therefore not for use or disclosure post-employment; it remains confined to trade secrets and highly confidential information equivalent to a trade secret.

If employers want to rely solely on the implied duty of good faith to protect their confidentiality, they nevertheless ought to consider communicating to their employees which information is confidential and reminding them of their duty not to disclose this information. However, this is a risky approach. An express clause in the employment contract which outlines precisely which information is confidential, together with the employer following up with the employee separately can provide more reassurance.

Drafting considerations ⚓︎

Often confidentiality clauses in contracts are drafted so that the same degree of confidential information is prevented from being disclosed both during and after termination of employment. This is risky because it is contrary to the doctrine of restraint of trade, which the courts will look to uphold. This doctrine essentially provides that any clause which seeks to restrict an employee on termination of their employment will be prima facie void, unless they have a legitimate interest to protect. The courts have held that this legitimate interest extends only to trade secrets and highly confidential information equivalent to trade secrets, which if disclosed would cause real harm to the employer. Therefore, a confidentiality clause which is wider than that, whilst being enforceable during employment runs the risk of being held, if ever disputed before the courts, to be unenforceable post-employment.

On the one hand, an employer should ensure that any express clause is drafted sufficiently wide to cover confidential information which the employer currently has, as well potential confidential information that the employer could develop in the future. On the other hand, employers must tread carefully. If a clause is too wide or is imprecise, not only could this be misconstrued in a dispute with an employee, it further runs the risk if it is brought to the attention of the courts being struck out in its entirety. The courts will not substitute enforceable wording for the unenforceable wording as drafted.

Protecting your confidential information ⚓︎

Employers may still wish to include a potentially unenforceable clause and use it as a negotiating position in the event of a dispute. The inclusion of well-drafted restrictive covenants in your contract of employment can offset the risk of an unenforceable confidentiality clause. These covenants should dovetail with the confidentiality clause and will offer further protection in terms of non-competition, non-solicitation, non-poaching and non-dealing, provided the employer has a legitimate business interest to protect and the restriction is reasonable.

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Kiera Lee is speaking at our upcoming event, Contracts for the Modern Employment Relationship, which is in association with Mills Selig and takes place on Wednesday 5th June at The Merchant Hotel, Belfast.

Click here to book your place