People & Leadership

Employee confidentiality agreement and laws for HR teams to know

Employee confidentiality is essential when it comes to keeping valuable, private information about your business from getting into the wrong hands.

Employee confidentiality is essential when it comes to keeping valuable, private information about your business from getting into the wrong hands.

As a business owner or senior manager, you need to make sure that important information about your products and services, as well as your business’s plans and financial strategy, doesn’t get into the hands of your competitors or anyone else who could use it to damage your company.

You’ll probably also have personal and financial details about your customers that need to be kept private for legal and regulatory reasons.

In this article, we go into more detail on employee confidentiality agreements, how they work, and what to include.

Here’s what we cover:

What is an employee confidentiality agreement?

Sometimes also known as a non-disclosure agreement (NDA), this is a legal contract that can protect sensitive or private information from being shared or misused by an employee.

It might form part of an employment contract but will usually continue to be enforceable with the person after they’ve left your employment.

David Greenhalgh, employment partner at law firm Excello Law, says, “Sometimes employers have a detailed separate agreement which deals specifically with confidential information.

“The employee will be asked to sign this separate agreement at the same time they sign their employment contract.”

Why are these agreements important?

Employee confidentiality agreements can help you to maintain competitive advantage by ensuring that competitors and others aren’t able to benefit from the important know-how and information that makes your business a success.

Equipment, real estate and other tangible assets aside, data, knowledge and intellectual property are more important than ever for the value as well as the day-to-day running of any business.

These agreements can protect:

• Trade secrets
• Intellectual property
• Product formulations
• Client data
• Sensitive information
• Future plans
• Conversations with regulators and other authorities
• Pricing information
• Financial records.

However, information that’s already in the public arena doesn’t come under one of these agreements.

UK employee privacy and confidentiality laws

Tsvetelina Nasteva is an HR expert and manager of human resources, and talent acquisition specialist at Casinoreviews.net.

She says, “UK law backs these agreements as long as they’re reasonable. They fall under general contract law, but the Trade Secrets Regulations also come into play, and if personal data is involved, you have to make sure you’re compliant with UK GDPR too.

“It’s not enough to just throw in a clause and hope for the best. You need to define exactly what ‘confidential’ means and how long it applies.”

It’s worth noting that NDAs can’t override the Equality Act 2010, which protects the rights of employees to report cases of discrimination.

Neither can they be used to prevent what are known as “protected disclosures”, in other words “whistleblowing,” as defined by the Public Interest Disclosure Act 1998. They obviously can’t prevent an employee from reporting a crime to the police.

You need to make sure that your agreements are clear and proportionate to be enforceable under UK law.

Clauses that could be regarded as unreasonable, vague or simply too broad could make the agreement invalid or unenforceable if, as the employer, you find yourself subject to a legal challenge.

Employee confidentiality agreement template: What to include

“The starting point is to think about the reason for wanting a confidentiality agreement,” says Kathy Daniels of Kathy Daniels Consulting Ltd, an employment law consultancy.

“What information is it that the employer wants to keep confidential, and which employees have access to that information?

“Having identified the information, the next step is to think about how to explain this to employees.

“What does keeping something confidential mean? Does it mean that the information cannot be discussed within the organisation, or is the restriction only with parties outside the organisation?”

Your agreement will normally include the following:

• The names of your company and the employee, along with their addresses
• Details of what constitutes confidential information and what employees are expected to keep private
• An outline of the employees’ responsibility to keep the information private, including any action they should or should not take
• Any exceptions to the information cited
• Whether the employee should return all physical and digital records containing confidential information when they finish working for you and, if so, how and when they should do this
• How long the arrangement or contract lasts
• What will happen if the employee breaches the rules
• Which jurisdiction the agreement is subject to. If you’re based in the UK, this will usually be UK law.

You’ll also have to think about whether to include a non-compete clause.

This restricts your employees from starting a competing business or disclosing sensitive information to competitors. It usually lasts for a certain amount of time. However, it doesn’t prevent them from working for a competitor.

“Consider implementing a graduated approach,” advises Chloe Leyland, an employment partner at Gunnercooke, a corporate law firm.

“Not every employee needs the same level of confidentiality obligations. Administrative staff might need basic agreements covering customer data, while senior managers, sales or R&D [research and development] personnel require more comprehensive protections.”

She advises company managers to remember the practical reality that their most valuable protection often comes from employee loyalty and engagement rather than legal documents.

Chloe adds, “While confidentiality agreements are important, investing in positive workplace culture and treating employees fairly often provides stronger protection than any contract clause.”

What happens if a member of your team breaches their agreement?

No one likes to think about it and prevention is always better than cure but it’s always a possibility of a breach.

“In the UK, these agreements are based on contract law,” explains Adrian Green, partner and head of employment law at solicitors Atkins Dellow.

“If someone breaks the agreement, the business can take legal action, including claiming damages or asking the court to stop further breaches.

“If an employee breaches confidentiality, they could face serious consequences like disciplinary measures, losing their job, or legal claims against them.”

David at Excello Law says, “If a confidentiality agreement is properly drafted and signed up to by the employee, employers will have weaponry available in the event of a breach of that agreement including threatening, or taking, injunctive action to shut down any breach and force the return of confidential information, or a claim for breach of contract for any loss suffered as a result of a breach.”

How HR software can help HR teams manage employee documents

Proper document management is essential when it comes to creating and managing these agreements and NDAs.

You need to ensure that they’re stored safely but they’re also easily accessible to the people who need them.

An effective HR software solution can also ensure that whenever any document, including an employee confidentiality agreement, is updated the latest version is available everywhere simultaneously.

HR software can enable employees themselves to check their confidentiality agreements quickly and easily. They can carry out a search and learn about a specific issue.

Instead of having to input and update employee personal details and data manually into documents and spreadsheets, you can allow the system to carry out these repetitive manual tasks.

You’ll know automatically who has read and amended their arrangement or, indeed, any other type of contract and when they’ve done it.

You can improve your business’s data security with the use of encryption and secure storage. It’s easier to decide who should access a document and when.

This works better for ensuring compliance with employment law and regulations such as UK GDPR.

Digital signatures for confidentiality agreements can also speed up processes and mean you don’t have to print out documents and have someone physically sign them. That’s a particular useful feature when so many of employees are now working remotely on in a hybrid manner.

This move towards document automation gives you and your HR team more time to have face-to-face conversations about confidentiality and other issues that might be important to your teams.

Final thoughts on employee confidentiality

With so many other things to consider when you’re running your business, an employee confidentiality agreement or NDA might not feature at the top of your to-do list.

However, putting one in place when you recruit new talent and ensuring they’re reviewed on a regular basis can save a whole lot of trouble.

Legal issues aside, it can help to signal to new recruits that you take confidentiality seriously and that they need to think carefully about what they post on social media and what they say to family and friends about your business.

Using HR software to create, store and maintain these agreements can save time, effort and money, while being open and honest with your teams about them can also minimise any problems with implementing them.

You can then get on with running your business, confident in the knowledge that you’ve taken an important step to secure its future.