Confidentiality Clauses

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  • April 11, 2024

Confidentiality clauses protect employers and employees. During the course of their employment, an employee is under an implied duty of confidentiality

 and is therefore under an obligation not to disclose to unauthorised third parties confidential information and trade secrets about their employment obtained during the course of their employment.

Why does it matter?

This is important because it means that information about the employer’s business remains confidential and cannot be disclosed because specific information can be beneficial to competitors and also, if specific trade secrets get out into the public domain it can cause commercial damage to the business.

Different people in a business doing various roles have access to different types of confidential information. For instance – anyone in a Finance team is likely to have details of a Company’s finances including loans, financial transactions, bank transfers, whilst a Payroll person will have access to employee salaries, bank account details, bonus/commission payments and full details of their earnings.

Needless to say, people in HR will have almost unlimited access to an employee’s details which might include sensitive personal data as well as details of their health or medical records and also details of disciplinary warnings etc.

What is confidential information?

In its simplest form, confidential information is information that is NOT in the public domain and is specific to the business and if such information was available to competitors or third parties, it could do commercial and/or reputational damage to the business.

Consider some slightly different examples of “confidential information”

  • A Restaurant client wanted to protect their recipe for a “special dish” so that competitors could not imitate it and they wanted to guard their secret ingredient
  • An agricultural business recently wanted to ensure that their employees kept secret the fact that they participate in an “environmental protection programme” – in other words, they were involved in controlled badger culling and this could have done considerable damage if protesters were aware
  • Receptionists and Cleaners working in a Doctor’s surgery or in a mental health hospital
  • Maintenance engineers in high security or government buildings.

Sometimes, employers want to ensure that their employees are aware that they may get told information of a personal nature during consultations and this must remain confidential. It is understandable that a client tells a solicitor or their accountant confidential information but it is common for people to pour their heart out to their hair stylist or beauty therapist so personal treatment businesses have to ensure that employees understand the sensitivity of the information they may be told during a consultation. It could also be very embarrassing…

Mergers and acquisitions

It is very common for a business to be contemplating either a merger or buying another business and in these cases, it is necessary for a small amount of people to be made aware because such information is commercially sensitive and it is not necessary for the entire workforce to be aware. In these situations certain employees are often asked to sign either a specific confidentiality document or – as it is sometimes called – an NDA – Non disclosure agreements.

NDAs are also used when a Company is involved in a new product or website launch, development of new technology or systems and it would be commercially disadvantageous if competitors were aware.

Information about mergers and acquisitions within PLCs is very complex because of the impact it might have on a share price which can give rise to issues of insider dealing.

Sales and customer listings

It is also important that Companies protect lists of customers/clients and their terms of business and it is not unusual for members of the sales team to have access to CRM data bases and if a sales person leaves to join a competitor, this information must remain confidential and could do untold commercial damage to a business.

Are confidentiality clauses enforceable?

Typically, a business can enforce a confidentiality clause as long as the information being disclosed is not in the public domain or is information that needs to be disclosed for legal purposes. Where a confidentiality clause is clear and includes a definition of what is regarded as confidential information, this will make a difference in ensuring that it can be enforced.

Does confidentiality apply after termination?

The implied duty of confidentiality applies after termination and this should be clear. It is advisable when an employee resigns to acknowledge receipt or their resignation but also remind them that any obligations regarding confidentiality in their contract continues to apply after termination of employment. It is also reasonable to go on to say that in the event of any breach, the Company will reserve the right to take legitimate action to protect their commercial interests. Such a statement in a letter can make the employee think twice and act as a deterrent.

Contractors and consultants

If a business is using consultants or contractors, it is imperative that there are confidentiality agreements in place because these people will not have signed employment contracts and it is alarming how much confidential information some people can access and there are no protections and safeguards in place.

AB Commercial HR Solutions offers HR support to business, if you want advice or support on any of the issues raised in relation to confidentiality, get in touch.

Contact us for more information