After terminating a labor contract, the binding responsibilities between employers and employees also terminate. Former employees working for other enterprises raise the employer’s concerns over information confidentiality.
The Non-Disclosure Agreement (“NDA”) is an option that helps businesses have the basis for agreements with employees to protect confidential information.
Employment contract and confidentiality obligations
When entering into an employment contract, rights and obligations of employees and employers are governed by the contract and its annex, company’s regulations, collective bargaining agreements (if any), and labor laws. According to Article 16 of the Labor Code 2019, before signing a labor contract, the employer is obliged to provide information about regulations on trade and technological secrets and other issues directly relating to contract signing. In the event that an employee discloses any of the above-mentioned confidential information, the employer can only apply dismissal as the highest form of discipline.
To bind the employees’ responsibility after they finish working at the company, employers can have them sign the confidentiality agreement (NDA – Non-disclosure agreement) from the beginning when the parties sign the labor contract. For this Non-Disclosure agreement, the Labor Code 2019 allows employers and employees to reach a written agreement on the contents, the terms for protecting business and technology secrets, benefits, and compensation in the case of a violation if the employee’s employment is directly related to the above-mentioned business or technological secrets.
Thus, a Non-disclosure agreement is a lawful agreement based on the provisions of the law and meets the valid conditions of a civil transaction. At this time, the Non-disclosure agreement is considered a valid civil agreement binding the two parties under the Civil Code. That is, when the employees violate the commitment after terminating the labor relationship, he/she still has to bear the liability for compensation for damages to the employer.
Key Components of an NDA
Depending on the company and its characteristics, the contents of an NDA may vary. In general, a basic NDA should include the following terms: The information that is considered confidential, the owners of such information, any exclusions, authority to access the confidential information, employees’ obligations when utilizing the confidential information in the course of work and after termination, the continuing obligations to protect confidential information, informing third parties about the presence of the NDA and penalties, the effect and duration of the agreement, etc.
Additionally, employers can prescribe terms of information confidentiality, trade secrets, and technological secrets in the company’s internal regulations, internal management policies, or collective bargaining agreements (if any) to provide the basis of reference for labor contracts, or include the NDA as an annex attached to the labor contract. Specifically, one of the mandatory contents of the Labor Regulation is to prescribe the list of assets, documents, technology secrets, business secrets, and intellectual property; responsibilities and measures applied to protect assets and secrets; acts of infringing upon property and secrets; and a mechanism to apply disciplinary measures for dismissal. The provision on the protection of business and technology secrets is a lawful act to protect the confidential information of the enterprise and is not in any way prohibited by the provisions of the Labor Code.
Importance of NDA for Enterprises
Employers, especially enterprises in the fields of software, manufacturing, engineering, etc., should pay more attention to signing a Non-Disclosure Agreement from the beginning, together with the labor contract. This is a warning step about the obligations of employees when they have access to sensitive and confidential information about the enterprise. At the same time, this is an important basis for the employer to request termination or send a warning to the employee in case the employee shows or violates the commitment between the parties.
When former employees work for a new company, the employer can send notice of the existence of the Non-Disclosure agreement to the former employees or to a third party. At the same time, they have the right to request the former employees to compensate for damage if they do not comply with the signed non-disclosure agreement and cause damage to the enterprise. This option is often used in cases where employees hold important positions or hold technical information, business know-how, and move to work for competitors in the same field.
Currently, most businesses are applying information technology to their operations. Therefore, businesses should focus on information security from the very beginning to avoid unnecessary risks.