How Can We Protect Company Secrets in Employee Non-Disclosure Agreements?

Non-Disclosure Agreement Clauses for Employees

I am looking for clauses to be mentioned in a Non-Disclosure Agreement for Employees. It should mainly cover the clause to penalize the employee if he/she uses the company details for their own benefit during or after employment. Many employees leave the company and either start their own business or join a similar company, using the details collected and generated for the old company. Sometimes, even during employment, they share the data for personal benefits or with competitors for monetary gain.

Any legal advice is welcome.

Thanks

Post-Termination Restraints in Employment Contracts

No such contract or NDA, being against public policy, is permissible. The Delhi High Court has held that an agreement with an employee not to undertake employment for 12 months after leaving the job will violate the Indian Contracts Act, 1872.

It has also been held that it is well settled that such post-termination restraints under Indian law are violative of Section 27 of the Contracts Act.

In another case, the Delhi High Court has held that the rights of an employee to seek and search for better employment are not to be curbed by the court through injunction orders, even on the ground that he has confidential data of the employer.

We are not looking for a clause wherein we are not allowing the employee to work in the same type of organization after separation. What we want is to secure our clients who have been given or generated while being in employment. It's a general practice to leave the organization and then contact the same set of clients where the employee has been working, especially in sales profiles.

There is a lot of money and company resources being spent to generate inquiries and get any customer on board. How can that be allowed to slip away just because the employee working on it has left and joined a similar trade? Non-Disclosure, Non-Compete, and Non-Solicitation Agreements are crucial. It's a direct loss to the company. Please share if there are any rulings on this.

I would appreciate your efforts.

Thanks

Understanding Non-Disclosure and Non-Compete Clauses

Stephen was discussing a negative covenant clause in their service agreement, which restricts the employee from joining another organization of a similar nature or business. Although such post-termination restraint agreements are void, confidentiality and non-disclosure agreements are valid and effective when exercised while the employee is in service. Therefore, the verdicts in the cases of Sandhya Organic Chemicals v. United Phosphorous, Ambiance India Pvt Ltd vs. Naveen Jain, or the Supreme Court verdict following section 27 of the Contract Act in Superintendence Co. of India v. Krishun Murgai (AIR 1980 SC 1717) are meant to stop the practice of employers preventing employees from joining competitors, not during the employee's time with the organization.

In a Non-Disclosure Agreement, you can incorporate clauses that ensure confidentiality in all operations. The agreement should also contain a clause stating that the data collected shall be the property of the employer, and the employee should transfer all data, including knowledge, in any form to another person when leaving the company or department due to any reason, including transfer or resignation. This way, the employer can collect all resources from the departing employee in physical form, although the employee cannot take out the brain and drain the knowledge out.

Regards, Madhu.T.K

The remarks of learned members have to be borne in mind. However, for the sake of record, the attached general clause could be used with suitable modifications for your purpose.