Employees often have access to information that directly affects the competitiveness of a business: customer bases, supplier relationships, pricing policies, financial models, internal processes, development plans, or information about future projects.
While an employee is working for a company, access to such information is a necessary part of their job. The problem arises when the information is passed on to a competitor, used in the employee’s own business, or becomes publicly available.
It is for such cases that the law provides for a trade secret regime. However, simply calling certain information a “trade secret” is not enough. In order for it to receive proper legal protection, the employer must properly organize the regime of its use and storage.
What is considered a trade secret?
The basic definition is contained in Article 505 of the Civil Code of Ukraine.
A trade secret can be information of a technical, organizational, commercial, production or other nature, if it simultaneously meets several characteristics: it is not generally known or easily accessible to persons who usually deal with this type of information, has commercial value precisely due to its secrecy and is the subject of adequate measures to maintain its confidentiality.
A trade secret belongs to the objects of intellectual property law. The Civil Code also provides for the right to prevent the unlawful disclosure, collection or use of such information.
In practice, trade secrets may include, for example, customer databases, non-public terms of contracts with counterparties, purchase prices, pricing algorithms, business plans, internal financial indicators, technological solutions, marketing strategies or information about products that have not yet entered the market.
However, the specific list always depends on the activities of the enterprise.
Can any information be declared a trade secret?
No.
The presence of an internal order or regulation does not mean that any information specified in it will automatically receive the legal status of a trade secret.
The information must meet the criteria established by the Civil Code, and the employer must actually take measures to maintain its secrecy.
In addition, the legislation contains categories of information to which access cannot be restricted.
In particular, the Law of Ukraine “On Information” does not allow restricting access to certain information about the state of the environment, the quality of food products, emergencies, the state of public health, facts of violations of human rights and freedoms, and other information specified by law.
A separate list of information that does not constitute a commercial secret, approved by the Cabinet of Ministers, continues to operate. Therefore, before forming an internal list of confidential information, it is worth checking whether the relevant category of information can be protected in this mode at all.
Why is one NDA not enough?
A common situation: a company signs a standard NDA with all employees and considers the issue of information protection closed.
In fact, an NDA is only one of the elements of protection.
In the event of a dispute, it will be important for the employer to prove not only the existence of an employee’s obligation not to disclose information, but also what information was protected, why it had commercial value, who had access to it and what measures the company took to maintain its secrecy.
If the client base is available to all employees, documents are sent to personal email addresses without restrictions, and the list of trade secrets is not defined at all, a single clause on confidentiality in the employment contract may not be enough for effective protection.
Therefore, protection must work not only on paper.
How to register a trade secret at an enterprise?
It is advisable to make the Regulations on Trade Secrets and Confidential Information the basic document.
It should define which categories of information are protected, who has access to them and to what extent, how such information is stored and transferred, what the employee must do after termination of employment, and what consequences are foreseen for violating the established regime.
At the same time, the provision should not exist separately from real business processes.
Access to information should be provided in accordance with the functions of a particular employee. For electronic data, delimitation of access rights, corporate accounts, logging of transactions, restrictions on copying or downloading documents can be used. For documents in paper form – appropriate marking and a specific storage procedure.
These measures also have practical legal significance: they help confirm that the employer has indeed taken the measures stipulated by Article 505 of the Civil Code of Ukraine to maintain the confidentiality of information.
What to provide for in employment documents?
The employee’s obligation not to disclose commercial secrets should be enshrined not only in the general position of the enterprise.
Depending on the organization of work, the relevant conditions may be contained in the employment contract, job description, internal labor regulations and a separate obligation or confidentiality agreement.
It is especially important to properly familiarize the employee with the documents that define his obligations and the procedure for handling protected information.
Otherwise, in the event of a dispute, a completely practical question may arise: did the employee know that specific information belongs to a trade secret and that he was obliged to ensure its confidentiality?
Does the obligation apply after dismissal?
Termination of employment relations in itself does not make the employer’s trade secret publicly available.
Therefore, it is advisable to directly provide in the documents for the obligation not to disclose and not to use the relevant information even after the termination of employment relations.
Upon dismissal, it is also worth organizing the return of documents and information carriers, and terminating access to corporate systems, e-mail, CRM and other information resources.
At the same time, the confidentiality clause should not be confused with a general ban on the employee working in the relevant field after dismissal. The protection of a specific trade secret and the restriction of a person’s future professional activity are issues of different legal nature.
Employee Liability
For violation of established labor duties, an employee may be subject to disciplinary liability in accordance with the Labor Code of Ukraine.
General disciplinary sanctions are reprimand and dismissal in cases provided for by law.
However, the disclosure of a trade secret in itself is not a universal separate ground for the dismissal of any employee. Therefore, the employer needs to assess the specific circumstances and the grounds provided for by the Labor Code.
For example, dismissal for systematic failure to perform duties without good reason is possible under the conditions provided for by law, in particular if the employee has previously been subject to disciplinary measures.
It is also important to follow the procedure for applying disciplinary measures and the deadlines established by the Labor Code.
Can damages be recovered from the employee?
If there are grounds provided for by law, the employee may be held financially liable for the damage caused to the employer.
However, labor legislation establishes special rules for such liability. Therefore, it is not enough to simply write an arbitrary fine in the NDA and expect that it will automatically be collected from the employee.
The employer must prove the violation of labor duties, the employee’s guilt, the presence of direct actual damage and the causal link between the violation and the damage caused. The scope of material liability is determined taking into account the rules of the Labor Code of Ukraine.
It is precisely proving the damage and its amount that often becomes one of the most difficult elements of such disputes.
Protection is not limited to labor legislation
Disclosure of a trade secret may have consequences not only in the relationship between the employer and the employee.
The Law of Ukraine “On Protection against Unfair Competition” separately defines the unlawful collection, disclosure, inducement to disclose and unlawful use of trade secrets as manifestations of unfair competition.
Therefore, a situation where a former employee transfers a protected client base to a competitor or uses commercial information obtained at a previous place of work in another business may go far beyond the boundaries of a regular labor dispute.
Depending on the circumstances, civil law and other methods of protection provided for by law may also be applied.
What to do if an information leak has occurred?
In such situations, one of the biggest mistakes is to immediately apply penalties without properly recording the violation itself.
First of all, it is worth establishing what information was disclosed, whether it had the status of a trade secret, who had access to it, how it was obtained or transferred, and what consequences this caused.
It is necessary to preserve available evidence: corporate correspondence, access logs, documents, information about downloading or transferring files, and other materials obtained legally.
Only after properly recording the circumstances should a specific response be determined – from disciplinary measures to claims for damages or legal protection.
Conclusions
A trade secret cannot be effectively protected with a single sentence in an employment contract or a template NDA.
The employer must first determine what information has commercial value for the business, establish rules for access to it, and ensure real organizational and technical measures for its protection. Employees who gain access to such information must clearly understand their obligations regarding its use and non-disclosure.
It is the combination of properly executed documents with an actual protection regime that significantly strengthens the employer’s position in the event of a breach.
