Confidentiality clauses are an essential component of modern contracts. With the increasing collection and handling of confidential information by companies, it is increasingly important to have clear and effective confidentiality provisions in employment and commercial contracts.

Stay here if you want to know everything you need to know about the world of confidentiality clauses and how they can affect you as an employee as well as an employer.

 What is a confidentiality clause?

Let us look more specifically at what it is: the confidentiality clause is a provision commonly included in an employment contract which states that the employee may not disclose confidential information of the company to third parties related to the company without the employee’s consent

In addition, they may require the employee to protect confidential information also after the termination of the contract.

What is the purpose of a confidentiality clause in employment contracts?

As mentioned above, a confidentiality clause serves to protect the interests, information and personal data of a company and its clients, so that they can remain secure. 

It can also protect the company’s intellectual property and other sensitive data that may jeopardize the company’s competitive advantage, in order to prevent unfair competition.

In addition, a clear and effective confidentiality clause can help the company comply with applicable laws and regulations.

Cases in which a contract with a confidentiality clause makes sense

It can make sense in companies such as technology companies, research and development, financial services and healthcare, among others. It is also common in consulting contracts, temporary employment contracts, and any other type of work where the employee has access to confidential information. 

What information do confidentiality clauses protect?

Confidentiality clauses can protect a wide variety of information, such as trade secrets, intellectual property, customer information, financial data, business plans, business strategies, formulas, patents, designs, prototypes and other sensitive data, so any information that is valuable and confidential to the company.

Detect when a confidentiality contract is abusive

Well, so far so good and flawless. But when is a confidentiality agreement abusive? 

There are cases where clauses can limit an employee’s rights when they are drafted in an excessive or restrictive manner. Here is a list of cases in which they can be considered abusive:

  • The clause is not well defined and may cover information that is irrelevant to the company;
  • The clause does not specify what confidential information is to be protected;
  • The clause prohibits the employee from sharing information that is in the public interest;
  • The clause imposes an excessive duration, limiting the employee’s employment opportunities after the end of the contract;

An abusive confidentiality clause may prevent the worker from exercising his or her freedom of expression and protection of labor rights.

If you are an employee and you sign a confidentiality clause

It is always important to read a confidentiality clause carefully before signing and also to consider the possible consequences of not complying with confidentiality clauses, so make sure you understand the terms and restrictions imposed and, if the clause seems excessive or restrictive, try to negotiate more reasonable terms.

Also, if you are not comfortable with the terms, you can seek legal advice to better understand your rights and obligations.

Consequences of not complying with confidentiality clauses

In case of non-compliance with the confidentiality clause, the employee may face disciplinary sanctions such as termination of employment, loss of employment, fines and damages.

What happens if I refuse to sign a confidentiality clause? 

On the other hand, if the employee refuses to sign a confidentiality clause, the employer may choose not to monitor him or terminate his contract. 

The employer may choose not to hire the worker who refuses to sign a confidentiality clause, as such clauses are common in many employment contracts.

So, is it important to include a confidentiality clause in contracts? 

In general, yes. A well-drafted and balanced confidentiality clause can protect sensitive company information and prevent unauthorized disclosure. However, it is necessary to include it in an employment contract if the information handled in the company may damage the company’s reputation or assets, and it is essential that the clause is well-defined and not abusive to the employee.

Download a sample confidentiality clause as a PDF

Keep in mind that every company is unique and may require different terms. To get a better idea of how to draft a confidentiality clause in an employment contract, it is possible to find many examples online, download a PDF and adapt it to the needs of each company and employee, as long as the clause is drafted by a specialized lawyer and does not limit the employee’s rights.

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Here are some frequently asked questions about this topic.

What happens if a confidentiality clause is breached?

If a confidentiality clause is breached, the affected party can take legal action against the person who has breached it. Legal action usually includes a court order to stop the disclosure of confidential information, as well as possible damages.

What are the differences between a confidentiality clause and a confidentiality agreement? 

While a confidentiality clause is a provision within a broader contract stating that the employee may not disclose confidential information to third parties, a confidentiality agreement is a separate document; apart from this small difference, they are quite similar.

Also known as an NDA (Non-Disclosure Agreement), the confidentiality agreement is a separate document that is signed prior to the disclosure of confidential information and sets out the confidentiality obligations of the parties involved.

What if there are no confidentiality clauses in the employment contract? 

If an employment contract does not include a confidentiality clause, the company and employees may be at risk of confidential information being disclosed. It is therefore advisable that contracts include a clause to protect this type of information from the company and also from its clients, as well as to ensure that employees understand the implications of disclosing confidential information. 

In the absence of a confidentiality clause in the employment contract, the company may still be able to take legal action against an employee who discloses confidential information if such disclosure violates other laws or regulations. 

In conclusion, confidentiality clauses are a vital tool to protect valuable and sensitive company information. It is important that both employers and employees understand the importance of these clauses and their legal implications. If you have any doubts about how the confidentiality clause in your employment contract works, we recommend that you seek legal advice.