Confidentiality clause

A confidentiality clause is an agreement between employer and employee that is included in the employment contract. It stipulates that the employee must keep confidential information secret from third parties and competitors. This agreement is included as standard in most employment contracts. Under this provision, an employee is prohibited from disclosing confidential information relating to the employer.

Confidentiality clause in employment contract

A confidentiality clause in the employment contract can cover various subjects. For example, the confidentiality obligation may relate to financial information or a company’s strategy. Customer information may also be confidential. An employer can make clear and correct agreements with an employee about this. It is recommended that the content and subjects covered by the confidentiality clause be clarified in concrete terms. This can be done directly when discussing the employment contract or by explicitly stating during a (work) meeting that information is confidential.

Confidentiality clause in settlement agreement

A confidentiality clause can be agreed before or after the employment relationship. When an employment contract is terminated with a settlement agreement, the employer and employee can agree to keep a number of subjects or confidential information secret. To this end, a confidentiality clause must be included in the settlement agreement. It is wise to agree on this agreement in close consultation. At the end of the employment relationship, it is clear what constitutes confidential information and this can be specified in detail, so that there is no ambiguity.

Penalty for breaching the confidentiality agreement

The information covered by the confidentiality obligation varies from company to company or employer to employer. Breaching the confidentiality clause is referred to as a breach of contract. The consequences of breaching the confidentiality agreement are also determined by each employer. For example, in the event of a breach of the clause, the employer has the right to fine the employee. To this end, a penalty clause must be included when drafting the confidentiality clause. The penalty clause sets out clear agreements and allows the employer to demonstrate that the penalty is justified. An employer may also issue an official warning or suspend an employee.

What is the advantage of including a penalty clause in the confidentiality clause?

The advantage of including a penalty clause in the confidentiality clause is that a breach of the confidentiality obligation can be punished immediately without the employer first having to demonstrate the actual damage. This creates a strong incentive for employees to treat confidential information with care and gives the employer a powerful means of taking action in the event of a breach. In this way, you can efficiently protect your business interests and avoid lengthy disputes over compensation.

Dismissal after breach of contract by employee

In the event of a breach of the confidentiality clause, the employer may also require the employee to pay compensation. In the event of compensation, it must be clear how much damage a company or organisation has suffered as a result of the employee’s breach of contract. Another consequence of a breach of contract is that it may lead to the immediate dismissal of the employee. All consequences associated with breaching confidentiality must be set out in writing. This is often clarified in the employment contract or company regulations. It is important to note that even without an explicit confidentiality clause, an employee is not free to share important or confidential company information from a (former) employer with third parties or competitors.

Seek advice on the duty of confidentiality

Although in some cases it can reasonably be assumed that information must be kept confidential, a confidentiality clause prevents you from being faced with surprises. You should therefore seek advice from a solicitor or ask an employment solicitor to assist you in drawing up a confidentiality agreement. For more information about confidentiality obligations for employees and the terms and conditions of the relevant clause in the employment contract, please contact one of our specialists in employment law.

Authors: Employment law solicitors Judy Sliepen and Myrddin van Westendorp