Trade secrets are an essential success factor for companies. However, not every blanket confidentiality clause in an employment contract stands up to legal scrutiny. A ruling by the Federal Labour Court (BAG, 17 October 2024, Ref. 8 AZR 172/23) shows where the limits lie and what consequences this has for employers.
Catch-all clause as a confidentiality clause
Catch-all clauses are contractual provisions that oblige employees to maintain confidentiality without restriction beyond the end of the employment relationship. Instead of naming certain information that is particularly worthy of protection, all internal processes – regardless of their nature – should be subject to a duty of confidentiality. Such clauses are often found in employment contracts, as employers believe that they can prevent any disclosure of sensitive data by former employees. In practice, however, they are regularly ineffective because they interfere excessively with the professional freedom of former employees and do not create an appropriate balance of interests.
The decision of the Federal Labour Court:
In the case decided, an employer had sued a former employee for injunctive relief after he had passed on technical information to a potential competitor during the employment relationship. The plaintiff relied on confidentiality clauses in the employment contract on the one hand, and on the provisions of the old Unfair Competition Act (UWG) and the now applicable Trade Secrets Protection Act (GeschGehG) on the other.
The BAG dismissed the employer’s appeal and emphasised two key points:
The GeschGehG applies
Although the infringement by the former employee took place before the GeschGehG came into force, the provisions of the GeschGehG must be taken into account in a court decision on future claims for injunctive relief. However, the behaviour must be regarded as unlawful under both the old law (UWG aF) and the current law (GeschGehG).
Invalidity of the catch-all clause
The clause used in the employment contract obliged the employee to maintain confidentiality about all internal processes of the employer for an unlimited period of time. The Federal Labour Court deemed this to be a catch-all clause and declared it invalid due to unreasonable discrimination.
The Federal Labour Court makes it clear that although employers can claim far-reaching protection of their know-how, this only applies if the requirements of the GeschGehG are met. In particular, it is necessary that certain technical or commercial information actually constitutes trade secrets within the meaning of the law. To this end, it must be demonstrated that “appropriate confidentiality measures” have been implemented. Anyone relying on this must clearly document that sensitive information is deliberately protected, for example through access restrictions, binding IT security standards or clear contractual provisions.
The BAG also clarified once again that employees may not be prevented from using their acquired knowledge in a new job after the end of their contract. An excessively generalised confidentiality obligation without a time limit or without compensation is therefore considered inadmissible. Catch-all clauses run the risk of acting as a hidden non-competition clause – without complying with the necessary formal and material requirements.
Important findings from the judgement
Companies should carefully review their non-disclosure agreements in employment contracts and draft them specifically in order to be legally secure in the event of a dispute. It is worthwhile only naming information that really requires protection and creating a clear culture of confidentiality through suitable technical and organisational measures. In this way, conflicts can be avoided and claims for injunctive relief under the GeschGehG can be effectively enforced.