by Anne Lyne July-13-2016 in Employment Law
On 27 May 2016 the European Council approved a Directive on trade secrets. The Directive is intended to harmonise the protection of trade secrets across the European Union. The Commission suggest that the intended Directive will promote creativity, innovation, research and development. Anne Lyne examines the impact of this new EU Directive on Employment law.
What are trade secrets?
The Directive introduces a new standard definition of a trade secret and outlines what constitutes lawful and unlawful use of it. A trade secret is information which is secret, in the sense that it is not generally known or readily accessible outside the organisation, has commercial value and, importantly for employers, reasonable steps have been taken to keep it secret.
Trade secrets will be deemed to have been acquired unlawfully if obtained through unauthorised access to, or appropriation of, materials containing the trade secret, or through any conduct which is contrary to “honest commercial practices”. Use or disclosure of trade secrets will be unlawful if a person has acquired the trade secret unlawfully, or if it is in breach of a confidentiality agreement, a contractual duty, or any other duty not to disclose the trade secret.
Will this affect employment rights?
From an employment law perspective this is likely to impact on contractual obligations of employees in relation to confidentiality and whether information and skills acquired on the job are to be considered generic in nature or a secret of the business.
Employees who leave a business to begin a new job will not be prevented under the Directive from using “experience and skills honestly acquired in the normal course of their employment”. The phrase “honestly acquired” is ambiguous enough in meaning to potentially cause headaches for employers, and even the courts. This Directive may give a disgruntled former employer a statutory springboard to challenge a departing employee and prevent them using skills in circumstances where perhaps there is no non-compete and an employer is looking to prevent the departing employee taking up employment elsewhere. This part of the Directive does not necessarily give an employer any greater protection then what currently exists at common law, but will provide a statutory basis for a case.
The Directive may also have an impact on whistleblowing and the Protected Disclosure Act 2014. There is a possibility that whistleblowing employees could face criminal sanction if they divulge information a company deems to be secret. The Directive will not protect trade secrets where the disclosure of the information serves the public interest and discloses misconduct, wrongdoing or illegal activity. It would appear that actual activity has to be disclosed, as opposed to a worker simply having a reasonable belief that it exists.
The whistleblowing regime in Ireland, unlike the UK, does not require a protected disclosure to be in the public interest. There has been some difficulty in the UK with determining the type of disclosure that can be said to be in the public interest, and that difficulty is likely to arise here also in light of this new requirement. Much may depend on the manner in which the Directive is transposed into legislation.
What should employers do?
Employers will need to establish a process that clearly identifies their trade secrets. Additionally, the detail of each employee’s role will need to be understood by employers if appropriate steps are to be taken to ensure that a trade secret does not fall within an employee’s “experience and skills”.
Employers will need to review employment exit procedures to ensure that the trade secrets are protected. Employers should consider revising existing contracts of employment to deal explicitly with trade secrets, and should provide adequate training to employees in relation to confidential information. Employers should also take steps to ensure that the company has a clear whistleblowing policy in place and that disclosures are dealt with promptly.
A version of this article appeared in The Sunday Business Post on 3 July 2016
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About the Author
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Anne Lyne
Anne is a partner in the Employment team at Hayes solicitors. She has considerable experience advising and representing employers and employees on all aspects of the employment relationship from pre-employment matters to termination.