Confidentiality and Competition: Employers, Protect Yourselves

Certain information held by employers can be of critical importance due to its confidential nature, including trade secrets and know-how. While practical measures can be implemented to protect such information, it is preferable to expressly address these matters in employment contracts.

In the course of their employment, employees may gain access to confidential information relating to the company, its products, manufacturing processes or clients. For reasons of both professional and personal liability, it is essential for employers to protect this information. “Employers can implement practical measures that are not strictly legal in nature, such as restricting access through magnetic cards or secure access codes. They can also resort to a less commonly used approach, namely including contractual clauses specifically governing the company’s trade secrets and know-how,” explains Florian Poncin, Avocat à la Cour.

Detailed Contractual Clauses for Better Protection

Among these specific provisions, confidentiality clauses are regularly included in employment contracts but are often limited to a few lines vaguely outlining the employee’s obligation to protect information obtained during and after their employment. “Unlike other contractual provisions, legislation and case law recognise that confidentiality obligations may survive the termination of the employment contract, provided that this is expressly stipulated. The more detailed the clause, the greater the protection afforded to the employer. We therefore recommend including as many concrete examples as possible,” adds the lawyer.

Introduced by legislation in 2019, the protection of “trade secrets” differs from ordinary confidentiality and remains relatively unfamiliar to many employers. Indeed, it is extremely rare to find specific references to this legislation in employment contracts. This is somewhat surprising, as this relatively recent legislation provides employers with strong, swift and effective protection against both competitors and unscrupulous former employees. Admittedly, distinguishing a trade secret from purely confidential information can be challenging. Nevertheless, three cumulative criteria define what constitutes a trade secret. “Firstly, the information must have commercial value. In other words, can the company use it to generate profits or develop its business or client base? Secondly, the information must be secret, meaning that it is known only to a limited number of people within a particular sector. Finally, technical measures must be implemented to preserve its secrecy, such as physical keys, access cards or an express and detailed confidentiality provision in the employment contract.” It is estimated that fewer than 10% of employers currently include provisions specifically addressing trade secrets. To gain a better understanding of this subject and incorporate appropriate provisions into their employment contracts, business leaders can seek advice from law firms such as Brucher Thieltgen & Partners.

Other, more widespread clauses aim to protect the know-how acquired by employees. Frequently used by employers, the non-compete clause provided for under the Labour Code underwent significant developments in case law a few years ago. “Traditionally, this clause prohibited an employee from engaging in a competing self-employed activity after leaving the company, for a maximum period of 12 months, within a defined geographical area and sector. In practice, this provision did not fully meet employers’ needs. Case law subsequently recognised the so-called extended non-compete clause, which had been developed to address the limited protection offered by the Labour Code. The distinctive feature of this extended clause is that the restriction may now also cover employment with a competitor, in exchange for financial compensation. The restriction must nevertheless remain limited in both time and geographical scope,” explains Catherine Wagener, Avocat à la Cour. An exclusivity clause, meanwhile, prohibits employees from carrying out independent or salaried activities for another company or on their own behalf during the employment relationship. Finally, a non-solicitation clause prevents employees from engaging in activities aimed at diverting clients or poaching employees, including former colleagues.

Anticipating Risks to Deter Contractual Breaches

Although these provisions help protect employers, their primary purpose is deterrence. It is essential to include each clause individually and separately in the employment contract, setting out its scope in as much detail as possible and providing concrete, non-exhaustive examples. In the event of a breach, legal remedies are available. Employers may initiate civil proceedings, generally resulting in financial compensation, or pursue criminal proceedings if they believe a criminal offence has been committed. Regardless of the clause breached, the employer will be responsible for proving the damage suffered. “However, it remains difficult for employers to accurately quantify their losses. The amount awarded by the court will often fall short of their expectations,” concludes Catherine Wagener.