Does your employment contract include a confidentiality clause or non-disclosure clause? Are you an employer who has used confidentiality clauses or non-disclosure clauses in your employment contracts to protect your business?
In this blog post, we discuss the significance of confidentiality clauses or non-disclosure clauses in employment law. Specifically, we look at what is a confidentiality clause, whether or not those types of clauses are enforceable and what can happen if an employee breaches a confidentiality clause in their employment agreement.
What is a confidentiality clause?
Confidentiality clauses may also be called a non-disclosure clause or non-disclosure agreement. Simply put, a confidentiality clause or non-disclosure clause prohibits an employee from sharing the employer’s confidential business information or practices to certain third parties like the employer’s competitors. These restrictions can also be called “restrictive covenants.”
These restrictions related to disclosure generally takes place both:
- during the course of the employee’s employment with an employer; and
- after the employment relationship with the employer has ended.
These clauses may be contained in an employment agreement or employment contract or maybe contained in a stand-alone agreement that both the employer and employee are subject to. These provisions may even be included in settlement documents connected to an employment related dispute such as a wrongful dismissal lawsuit.
Examples in which a confidentiality clause would be used in employment law would be to protect the employer’s trade secrets, intellectual property, client or customer lists or other commercially sensitive information. In situations were there has been a settlement related to an employment law dispute, these types of agreements may be used to ensure the monetary amount of the settlement is kept confidential between the parties to the dispute. For more information about what can be contained in an employment law related settlement, please review our blog Our Guide to Settlement in Employment Law.
Are confidentiality clauses enforceable?
Yes. Confidentiality clauses and non-disclosure clauses in employment contracts are generally enforceable. However, there may be certain circumstances in which they could be held by Ontario courts as not being enforceable.
For instance, in situations where the confidentiality clause was drafted too broadly, Ontario courts may decide that the confidentiality clause should be held to be unenforceable. As such, confidentiality clauses should be carefully drafted to set out clearly what the clause is protecting. If a confidentiality clause seeks to hold confidential information that may be general knowledge or easily sought out by third parties or simply part of the employee’s own unique knowledge base would probably be too broad and, as such not enforceable. The more the information is linked to the employer’s genuine proprietary interests, the more likely it will be held to be enforceable.
Another example where a confidentiality clause or non-disclosure clause in an employment agreement could be considered too broad, would be in situations where the cause has a duration that is simply too long. What a reasonable duration is could change based on what type of information the confidentiality clause is protecting. There could be situations where a confidentiality clause is limited to a period of only a few years or it could be set indefinitely.
The onus is on the party seeking to enforce the clause (generally the employer) to prove that the confidentiality clause is enforceable.
What can happen if an employee breaches a confidentiality clause in an employment contract?
If an employee breaches a confidentiality clause in an employment contract, they have a heightened litigation risk as the employer may seek to enforce the cause by using court processes such as an injunction or may sue the employee for damages for the breach.
How can Zeilikman Law Help?
It is important to speak to an employment lawyer before making any decisions regarding how to interpret an employment agreement with a confidentiality or non-disclosure clause or confidentiality agreement, particularly if the employee has been wrongfully dismissed. If an employer or employee has any questions regarding these issues, they are invited to contact one of our experienced employment lawyers to set up a consultation to discuss their legal options.
If you would like to learn more about different clauses that may be contained in an employment contract or employment agreement, please review our blogs entitled Our Guide to Non-Solicitation Agreements in Employment Law and Are Non-Compete Clauses Enforceable in Ontario?.
Employers and employees can contact our office at (905) 417-2227 or online here to schedule their own confidential consultation with Zeilikman Law.
