by Stefan Nerinckx, Partner – Employment Law, Fieldfisher LLP Brussels
The war for talent, a volatile labor market and relentless competition between businesses, all mean that business and trade secrets must be carefully protected against theft, disclosure and unfair practices. A European directive (2016/943) provides for harmonization of the statutory framework at the European level and has been transposed into Belgian law by the Act of July 30, 2018, which amended the Code of Economic Law and the Judicial Code as well as the Employment Contracts Act.
Until recently, the protection of trade secrets was provided for by various pieces of legislation, without a streamlined definition of trade secrets or remedies. The Act of July 30, 2018 on the protection of trade secrets, transposing into Belgian law Directive 2016/43 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (entered into force on August 24, 2018), provides for a uniform definition.
Definition of trade secrets
The Code of Economic Law prohibits the unlawful acquisition, use and/or disclosure of trade secrets.
Trade secrets are considered to be:
- Secret information - consequently not generally known or in the public domain and that must, for example, not be readily accessible to persons that normally deal with the kind of information in question -
- that has commercial value because it is secret and
- that has been subject to reasonable measures to keep it secret.
If information meets the three above-mentioned criteria, it will be deemed a trade secret.
Unlawful acquisition, use and disclosure of trade secrets
The acquisition of a trade secret without the consent of the trade secret holder shall be considered unlawful when it occurs through:
- Unauthorized access to, appropriation or copying; or
- Any other conduct which, under the circumstances, is considered contrary to honest commercial practices.
The use or disclosure of a trade secret shall be considered unlawful when carried out, without the consent of the trade secret holder, by a person who is found to meet any of the following conditions:
- Having acquired the trade secret unlawfully;
- Being in breach of a confidentiality agreement or other duty not to disclose the trade secret;
- Being in breach of a contractual or other obligation to limit the use of the trade secret.
It is also not permitted to acquire, use or disclose a trade secret whenever a person, at the time of the acquisition, use or disclosure, knew or ought to have known, that the trade secret was obtained directly or indirectly from another person who was using or disclosed the trade secret unlawfully. Finally, it is not permitted to produce or trade in goods that violate a trade secret (infringing goods) when the person carrying out such activities knew or ought to have known, under the circumstances, that the trade secret was acquired unlawfully.
Trade secrets in the employment relationship
The confidentiality of information acquired in the context of the employment relationship is provided for by Article 17(3) of the Employment Contracts Act. Article 17(3) has been amended by the Code of Economic Law. As such, following the change, employees are obliged, both during the term of the employment contract as well as afterwards, to refrain from the unlawful acquisition, use or disclosure, (within the meaning of Article XI.332/4 of the Code of Economic Law), of a trade secret (within the meaning of Article I.17/1(1) of the same Code), or secrets related to personal or confidential matters, of which they learn in the performance of their professional activities.
It is now also understood that the employer must make certain tools available to fully protect its trade secrets; the responsibility and obligation not to use or disclose trade secrets do not rest solely on the employee. The employer must demonstrate that it has taken measures to protect its confidential information so that the employee is not exposed to an opportunity to use it. In this regard, it may be appropriate to lay down rules establishing how employees are expected to deal with confidential information and who may handle such information.
Furthermore, a number of other points are worth noting. The employer must ensure that its employees are fully informed of what is meant by trade and business secrets. Rules detailing the employer's confidential information would appear appropriate. In this way, the employer can demonstrate that the employee was aware of the confidential nature of the information in question. It can be provided, for instance, that strategic information, marketing plans, financial information, price lists. and others alike, are confidential. The precise definition will depend on the company's activities.
Even in the pre-contractual phase - thus not on the basis of the employment contract - it may be appropriate for the employer to inquire if the employee is bound by a specific confidentiality agreement or obligation, in order to ensure that it cannot be considered an accessory and held liable on this basis by the former employer for violation of the employee's confidentiality obligation. Here as well, the employer must take the necessary measures to ensure that confidential information belonging to the former employer is not used.
Protection of trade secrets in the cross-border employment context
If an employee is engaged in international or cross-border activities, it is important to determine the law applicable to these activities. Indeed, despite the level of harmonization achieved by the directive, there may be differences between the various EU Member States. It is, consequently, important to conclude a valid confidentiality undertaking in accordance with the law applicable, for example, during the employee's assignment, to ensure that it is enforceable.
However, since this matter relates to mandatory rules of law, it should be noted that the choice of law will not always be decisive. When no choice of law has been made, the applicable law (within the EEA context) will be determined with reference to Regulation 593/2008 (ROME 1 Regulation). Thus, in the event of a temporary secondment from the US to an EEA country during which the law of the home country (country of habitual employment) continues in principle to apply, the protection afforded by US law to confidential information may not be adequate compared to the EU directive and its implementation; it may even violate these provisions.
It may thus be appropriate to include in the secondment agreement, if necessary, conditions/clauses in order to ensure that the confidentiality undertaking complies with the provisions of the host Member State. For example, there may be differences in terms of the sanctions and determination of a possible fine in the event of breach of the confidentiality undertaking. The remedies may also differ.
Actions for an employer
- List the confidential information and make sure employees do know what is to be considered as confidential information in the company;
- List the security measures put in place to prevent confidential information from being made public (restrict and secure access to the information);
- Adapt employment contracts to be in line with the latest legislation;
- For international mobility cases, it is very important that the applicable law is determined (not only by choice, but based on legal instruments such as the ROME 1 Regulation) upfront, and the clauses are drafted accordingly to be enforceable.