Confidentiality agreements: Contractual obligations

Depending on the type of information in question, employees might have implied or express contractual obligations not to disclose it, both during and after employment.

Implied duties of confidentiality during employment

During the employment relationship there is an implied duty that employees will conduct themselves with fidelity and good faith. This implied duty involves the following obligations:

  • To act honestly towards the employer.
  • To disclose to the employer all information relevant to its business.
  • Not to make secret profits from the employer’s business.
  • To respect the confidentiality of the employer’s commercial and business information.
  • Not to compete with the employer’s business.

The duty is implied into all contracts of employment and employment relationships, no matter how senior the employee is.

Extent of implied confidentiality duty

The extent of the implied duty of confidentiality will depend upon the type of information involved. Information that an employee is expressly told is confidential, and obviously is confidential as a result of its character, is protectable without covenant during employment. Employees may not use such information for their own advantage (and at the expense of the employer) or to benefit a third party (for example, a competitor).

Despite the existence of the implied duty, employers should consider expressly protecting their confidential information during the employment term.

Express duties of confidentiality during and after employment

It would be unwise for an employer to rely solely on implied terms. While an employer cannot make non-confidential information confidential simply by deeming it so, there is a grey area between information which is clearly confidential and that which is mere skill and knowledge. In respect of the information falling within this grey area, a prudent employer will attempt to specify in its employment contracts or stand-alone confidentiality agreements that the information is confidential to the point of being trade secret, that its disclosure is forbidden and that the employer will be entitled to seek damages or injunctive relief if the employee discloses it.

While trade secrets are protectable after termination of employment without express covenant, the prudent employer will also impose express obligations in its employment contracts or stand-alone confidentiality agreements. This has a number of benefits:

  • It will help the court make a decision as to what information is properly a trade secret.
  • It will draw employees’ attention to the secrecy obligation, and help explain what is expected of them.
  • It is preferable to try to enforce an express term of a contract signed by an employee rather than just an implied term.
  • Employees who are considering improper disclosure of their employer’s information and who take advice on the effect of the terms of their employment contract or other agreement are more likely to receive stronger advice against such disclosure if their advisor can see a well-drafted express covenant.

For more information, contact our confidentiality agreement solicitors Helen Monson, Imogen Finnegan and Rhodri Thomas.