Contract Law

In our ever-changing, high-tech environment, rife with competition and innovation, secrets of a technological and proprietary nature are becoming more and more common in the workplace.

The rapid pace and scale of advancements lends itself not to traditional, registered methods of protecting secrets—including copyright and patents—but rather to the less common but growing realm of trade secrets and confidential information.

Given that trade secrets and confidential information must be shared with at least certain employees, in the absence of legal mechanisms for registration how can an employer or proprietor protect its confidential information? This can be especially challenging—and hugely important—when the confidential information forms the basis for an organization’s value.

The first step in protecting confiden­tial information is assessing whether it is actually confidential in nature. Information widely known throughout a particular industry (namely, the industry in which the organization operates) will not generally be seen as confidential. However, product-related information will likely fall within the class of confi­dential information which an organiza­tion will want to protect, especially from the risk posed by departing employees, if an innovation:

  •  is specific to a product;
  • results from an organization’s own research and development; and
  • differentiates the product from that of its competitors.

Identifying such information as confiden­tial will be paramount. An employee cannot be expected to maintain a confidence or maintain as confidential information that he or she does not understand as being subject to such protection.

It behooves an employer to take steps to protect such information, including, but not necessarily limited to:

  • classifying and physically marking, where possible, such information as confidential;
  • informing employees of what classes of information qualify as confidential;
  • limiting access to confidential information to those who need such access in order to fulfill their responsibilities; and
  • limiting access to digital information, data, cloud storage, hard drives or other media where confidential information is stored.

Once confidential information is identified and protected, an employer should take those steps necessary to protect its confidential information by implementing both contract- and policy-specific language.

While it is true that the common law duty of fidelity prohibits an employee from disclosing her employer’s confi­dential information during the course of employment, that duty does not necessarily survive the termination of the employment relationship. Contracts can provide protection where the common law is silent.

A carefully drafted confidentiality clause ought to form part of every contract of employment. This clause should outline, in detail, the type of “confidential infor­mation” protected. The clause should also set out the circumstances by which confidentiality may be lost, and the con­sequences for a breach of the clause by an employee.

Confidentiality clauses and other restrict­ive covenants, where appropriate, must be drafted and prepared with due care and attention. The cost of doing so is far outweighed by the cost of potential loss of confidential information and unfair competition that may otherwise arise.

Remedies available to employers for breaches of confidence by current or former employees range from injunc­tive relief—which aims to immediately impose restrictions on the use and disclo­sure of confidential information by those responsible—to the payment of damages for breach of confidence and, in certain circumstances, breach of fiduciary duty.

For more information on contracts and effective confidentiality clauses please contact Veronica