Can a Confidentiality Clause in an Employee Manual Hold Up After Resignation?

Please give your valuable comments.

BACKGROUND:

An organization enters into a confidentiality agreement with customers. However, the company does not have a separate NDA with employees and may face some resistance if an NDA is now initiated with existing employees. The employees are given a handbook/manual (a kind of policy manual) at the time of joining. The manual contains a confidentiality clause (e.g., exclusive customer-related information received should not be disclosed even after resignation). The employee signs in duplicates, and a signed copy of the employment manual is with HR.

THE QUESTION:

Will he/she be bound by this clause after leaving the company and joining a competitor? Can the company initiate legal action based on this clause?

Please clarify.

Regards, Sambasivam

An employee is bound by a Confidentiality Clause only during the tenure of their employment with the company. You can initiate legal action against an employee only when they breach the clause agreed upon and signed during the course of employment. You cannot prevent an employee from joining a competitor. Once the employee is relieved from employment, the previous employer cannot enforce any clause or condition stipulated earlier.

With regards,
Madhusudan

Generally, companies ask their employees to sign a similar clause of confidentiality, which seems sufficient. Sometimes, your customer may want you to have a separate NDA signed with employees for their satisfaction. If your customer wants to have an NDA signed with employees, you will need to do it in the name of customer satisfaction, even though you already have a clause in the employee handbook.

Meeting with Employees

I suggest calling for a meeting with employees to make them aware of the NDA. Explain why there is no harm in signing an NDA and why it is beneficial for the company's business. Many people mistakenly believe that signing an NDA means being bound by the employer or being restricted from joining a competitor.

Purpose of an NDA

An NDA cannot prevent a breach of confidentiality; it simply establishes an ethical understanding between the employer and employee regarding the confidentiality of trade secrets. The purpose of an NDA is to emphasize the importance of confidentiality and to hold individuals accountable for maintaining it.

If your customer desires it, your company and all employees should respect their demand for confidentiality.

Thanks,

Vikas

I completely disagree with this contention. An employee's duty to keep confidential information received during employment, as far as it relates to trade secrets, customer confidential information, etc., remains even after the employee leaves. It is an implicit part of the contract of employment, even if he was not signing the HR manual.

Continuity of Confidentiality Obligations

The terms of the manual signed do not end when employment ends; they continue to bind the employee concerning events that occurred during his employment. The exceptions would be any onerous requirements that hinder normal career growth, such as prohibiting taking another job or using the knowledge imparted.

Importance of a Formal NDA

However, as stated by others, getting a formal NDA signed is better, as its enforceability is easier in courts.