In the context of increasingly fierce business competition, trade secrets and technological secrets are core assets that help enterprises maintain their market position. To protect sensitive information, confidentiality agreements are often established between employers and employees, with obligations that may extend beyond the termination of the employment contract. So, how are employees who breach confidentiality agreements handled? This article analyzes the relevant legal provisions, the legal responsibilities of employees, and key considerations for compliance with the law, based on the Labor Code 2019 and related guiding documents.
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1. What is a Confidentiality Agreement?
A confidentiality agreement for trade secrets or technological secrets is a legal document designed to prevent the unauthorized disclosure or use of critical business information, such as client lists, production formulas, or proprietary technical data. According to Clause 2, Article 21 of the Labor Code 2019 (No. 45/2019/QH14), employers are entitled to enter into written agreements with employees regarding:
- The scope and content of trade secret and technological secret protection.
- The duration of confidentiality obligations.
- The rights, benefits, and compensation responsibilities in case of breaches.
Article 4 of Circular 10/2020/TT-BLĐTBXH provides detailed provisions on the main contents of a confidentiality agreement, including:
- List of secrets: Specific information to be protected, such as software source code or business strategies.
- Scope of use: Regulations on how employees may use the information.
- Duration of protection: May extend beyond the termination of the employment contract, depending on the agreement.
- Protection methods: Measures to ensure the confidentiality of information.
- Rights and obligations: Responsibilities of both parties in safeguarding the information.
- Handling breaches: Measures for addressing violations, including compensation for damages.
Note: Entering into a confidentiality agreement is not mandatory in an employment contract. However, if the employee’s work directly involves sensitive information, employers typically require such an agreement to protect their interests.
2. Legal Provisions on Handling Breaches of Confidentiality Agreements
When an employee breaches a confidentiality agreement for trade secrets or technological secrets, the applicable legal provisions depend on the timing of the breach (during or after the employment contract) and the severity of the violation.
2.1. Breaches During the Employment Contract
If a breach occurs while the employment contract is still in effect, the employer may apply disciplinary measures under Article 124 of the Labor Code 2019, including:
- Extension of the salary increase period by up to 6 months.
- Termination (if specified in the company’s internal labor regulations).
The statute of limitations for disciplinary action is provided under Article 123 of the Labor Code 2019, which is 12 months from the date of the violation related to trade secrets or technological secrets.
Additionally, pursuant to Article 130 of the Labor Code 2019 and Clause 3a, Article 4 of Circular 10/2020/TT-BLĐTBXH, employees may be required to compensate for damages as per the agreement or labor law provisions on compensation.
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2.2. Breaches After Termination of the Employment Contract
If a breach occurs after the employment contract has ended, the matter is governed by civil law and other relevant regulations, as outlined in Clause 3b, Article 4 of Circular 10/2020/TT-BLĐTBXH. The following measures apply:
- Compensation for damages: Under Article 584 of the Civil Code 2015 (No. 91/2015/QH13), employees who cause damage by breaching a confidentiality agreement may be liable for non-contractual damages. Compensation may include:
- The value of lost or damaged assets.
- Costs incurred to mitigate the consequences.
- Losses of profits or business opportunities.
- Administrative penalties: According to Article 16 and Clause 7, Article 4 of Decree 75/2019/NĐ-CP, employees who disclose or use trade secrets without authorization may face fines ranging from VND 100 million to VND 150 million for individuals for the following acts:
- Accessing or collecting trade secret information in violation of the owner’s security measures.
- Disclosing or using trade secret information without the owner’s permission.
- Additional penalties:
- Confiscation of materials or instruments used in the violation.
- Confiscation of profits derived from the violation.
3. Key Considerations for Legal Compliance
3.1. For Employees
- Understand the agreement: Thoroughly review the terms concerning the scope of protected information, duration of obligations, and liability for breaches to avoid unintentional violations.
- Seek legal counsel: Consult a lawyer if unclear about obligations or rights before signing the agreement.
- Adhere to obligations: Employees remain liable for breaches even after employment termination, particularly if the agreement specifies an extended confidentiality period.
3.2. For Employers
- Draft precise agreements: The agreement must clearly specify the protected information, confidentiality duration, and breach-handling measures. Terms must comply with Article 5 of the Labor Code 2019 and not unduly restrict employees’ labor rights.
- Gather sufficient evidence: When a breach is detected, employers must collect robust evidence to support claims for compensation or legal action.
- Training and oversight: Implement training programs to enhance employees’ awareness of confidentiality obligations and establish appropriate monitoring mechanisms to prevent violations.
Breaching a confidentiality agreement for trade secrets or technological secrets can lead to significant legal consequences, including compensation for damages and administrative penalties. The Labor Code 2019, Circular 10/2020/TT-BLĐTBXH, Decree 75/2019/NĐ-CP, and Civil Code 2015 provide a comprehensive legal framework for addressing such violations. Both employees and employers must fully understand their rights and obligations to ensure compliance, minimize legal risks, and protect their legitimate interests.
Disclaimer:
This article is intended for informational purposes only and does not constitute legal advice from HTH & Partners. The content represents the views of HTH & Partners and is subject to change without prior notice.
The legal provisions referenced in this article were valid at the time of publication but may have been amended or repealed by the time of reading. We strongly recommend consulting a qualified legal professional before applying any information contained herein.
