Along with an employment agreement, employees’ Non-Disclosure Agreements (“NDA”) are entered into between the employer and employees to prevent employees from disclosing confidential information about the employer to other persons.
Terms and Duration of Confidentiality
The terms and conditions in a NDA may vary depending on the commercial organisation. The agreement may specify the precise confidential information that an employee is required to keep secret or it may include a broader definition of confidential information that covers all information an employee collects, processes and/or receives that is not made publicly available. A NDA may bind a former employee for a specific time limit even after termination of employment, or perpetually following his or her such termination.
Therefore, it is crucial to pinpoint what constitutes confidential information and to stipulate the time limit of the confidentiality, prior to signing the NDA.
Drafting of a NDA
As an employer that promotes the best interest of its commercial organization, it is important to scrutinize, among others, the following material contents while drafting an NDA:
- Purpose of the NDA. NB: the purpose of the NDA must not violate principles of law and equity in a way that results in restraint of trade.
- The interpretation and definition of “Confidential Information”.
- Duration of the confidentiality.
- Duties of the employees in using and safeguarding the Confidential Information.
- The extent of indemnity the employer shall be entitled to in the event of the employee’s breach of confidence.
Legal Impact of a NDA
If an employee has breached its obligations under the NDA, the employer must take note that in a legal proceeding commenced against the employee, it is not sufficient for the employer to merely allege that a former employee has “leaked private and confidential information”.
Pursuant to a recent Federal Court Case decision, (Dynacast (Melaka) Sdn Bhd & Ors v Vision Cast Sdn Bhd & Anor [2016] 3 MLJ 417) all employers must bear in mind that:-
1. An employee’s obligations of confidentiality depend on the terms of the agreed contractual obligations stated in the NDA.
2. In the event of a breach of confidentiality, employers must be able to identify and particularise the confidential information said to have been misappropriated or misused. The law allows former employees to use their own knowledge and experience accumulated over the years and this includes potential customers, price trends and market information that is in the public domain. Usage of this personal knowledge and experience is not a breach of confidentiality.
Conclusion
To that end, employees who have access to confidential information should be made to sign NDAs. Further, while drafting a NDA, professional legal advice must first be sought in order to prevent having a NDA that creates disputes or is unable to protect the parties’ rights at all.