Information confidentiality issues in labor relations

In the innovative economy, labor relations in the labor market are relationships formed on the basis of voluntary agreements between those that employ (“employers”) and those that are employed (“employees”). Although the relationship is established on a voluntary basis, in many cases the subjects participating in the relationship often do not correctly determine their position, leading to inappropriate behavior and demands that affect the relationship, creating conflict in relationships. Furthermore, employees’ understanding of labor laws is sometimes limited, causing them to not know how to protect themselves against issues in labor relations. The issue of information confidentiality is one of the issues that is always mentioned and agreed upon in labor contracts. Typically, this clause often states that the employee must keep business secrets, technological secrets, and not work for the employer’s competitors during and after a period of time from the date of termination of the labor contract. On the employer’s side, this is a provision that ensures their rights, helping them protect business secrets. However, on the other hand, this provision may limit workers’ freedom to work protected by law.  

1. The concept of information confidentiality in labor relations 

In labor relations, information confidentiality can exist as a clause in the labor contract or as a separate agreement – non disclosure agreement (NDA). 

Regardless of its form, information confidentiality in labor relations also has content that represents the agreement between the parties in the labor contract to protect the information that the parties know and provide to each other during the work process. Accordingly, employees often make commitments and must comply with limits within a limit of time, space, and field to protect technology and business secrets for the employer if, after leaving the job, the employee works for another company and anticipate legal consequences in case the employee violates this commitment. On the contrary, employers also have an obligation to protect personal information, salary information, bonuses and other information of employees. 

In accordance with the spirit of foreign laws, the Labor Code 2012 also allows parties in a labor contract to agree on a confidentiality clause: “When an employee performs a job which is directly related to business or technology secrets as prescribed by law, the employer may reach a written agreement with the employee on the content and duration of protection of business or technology secrets, and benefits and compensation in case of violation by the employee”.(1) However, the Labor Code 2012 only serves as a suggestion, allowing the parties to agree on information confidentiality without any specific instructions for practical application.   

2. Provide information when concluding labor contracts 

Derived from general principles of the Civil Code(2): “Each person must establish, exercise/ fulfill, or terminate his/her civil rights and/or obligations in the principle of goodwill and honesty”. Employers and employees in labor relations also have an obligation to provide truthful information when entering into contracts.(3) Providing information helps the parties understand each other, understand the nature of the work that needs to be done, and have information to do the best job. However, this information needs to be kept confidential, especially information about business secrets or technology. 

Therefore, Clause 2, Article 21 of the Labor Code 2019 stipulates: “If the employees’ job is directly related to the business secret, technological know-how as prescribed by law, the employer has the rights to sign a written agreement with the employee on the content and duration of the protection of the business secret, technology know-how, and on the benefit and the compensation obligation in case of violation by the employee.” 

However, labor law has not introduced any concepts of “technological secrets” and “business secrets”. According to intellectual property law, information is considered a business secret and is protected if it meets the following conditions:(4)

• It is neither common knowledge nor easily obtainable; 

• When used in business activities, the trade secret will create for its holder advantages over those who do not hold or use it; 

• The owner of the trade secret maintains its secrecy by necessary means so that the secret will not be disclosed nor be easily accessible.

In addition, technological secrets are not mentioned in intellectual property law. In fact, in essence, “technological secrets” can be methods, methods, and processes in the enterprise’s production and product manufacturing activities, and are typical of the enterprise’s business activities in the industry and meet protection factors such as trade secrets. 

3. Regulations on information confidentiality agreements in labor relations  

Regulations on information confidentiality agreements are designed to control and bind employees’ responsibilities during work and after leaving the enterprise, protecting employers. However, this is a rather general regulation and there are not many documents guiding its implementation from lawmakers. Therefore, in practical application of information confidentiality agreements, employers often build this content themselves in different forms such as terms in labor contracts, information confidentiality agreements (NDAs), and commitments to information security….  

From the point of view of best protecting the business secrets of the enterprise, employers often develop information confidentiality provisions to give themselves an advantage “workers’ right to freedom of employment(5)– a personal rights and inviolable” leading to the provision being invalid due to violating the law’s prohibition.(6)

This leads to difficulties for employers and employees when applying information confidentiality in practice. If an employer exercises the right to request an employee not to work for a competitor, it will limit employment opportunities and affect the employee’s freedom to work. On the contrary, if creating conditions for employees to exercise their right to freedom of employment, employers face the risk of business secrets being disclosed, affecting business operations.  

4. Non-compete clause in employment contract 

When an employee (EMPS) works for an employer (ER) related to business secrets, production secrets and other confidential information of the ER, the EMPS has accidentally or intentionally captured this confidential information of the ER. When the labor relationship ends, the EMPS can work for another ER in the same industry or a direct competitor of the old ER. In this case, the EMPS can use the old employer’s business secrets to serve the new ER’s work, which is unintentionally an act of unfair competition for the old ER. To protect their trade secrets, ER often establishes provisions that prohibit EMPS from working for the ER in the same industry or their competitors after the employment contract terminates for a certain period of time. This provision is considered a non-compete agreement in labor relations. During the above agreement period, the EMPS must still comply with the agreed non-compete clause. 

Looking back at the formation and development of the Labor Code in Vietnam, before the 2012 Labor Code, Vietnamese law hardly recognized the validity of non-compete agreements in labor relations.(7) Clause 2, Article 23 of the Labor Code 2012(8) is a law that opens the door for recognition of the legality of non-competition agreements in labor relations in Vietnam. This content is also maintained in the current 2019 Labor Code. However, from a legislative perspective, there is currently no legal document specifically regulating or recognizing the validity of non-competition clauses in labor contracts. Unlike some other confidential information methods, the non-compete clause still limits employees’ freedom to work as recognized in the 2013 Constitution and labor laws. Thus, it can be seen that although Vietnamese lawmakers have become more open to protecting the legitimate interests of ER in labor relations, the issue of the validity of non-competition clauses in labor contracts has not yet been clarified. This makes it difficult for both ERs and EMPS to balance interests when entering into contracts with non-competition clauses.

5. Confidential information through Internal Labor Rules 

Different from the method of confidential information using non-competition agreements in labor relations and non-competition clauses in labor contracts, the labor law encourages the stipulation of confidential information obligations in internal labor regulations.(9) In addition, ER can consider violations of confidential information regulations as a disciplinary violation and apply appropriate disciplinary measures, including dismissal. 

Stipulating confidential information obligations and violations of confidential information obligations in labor regulations will help ER  protect their legal rights and obligations. However, this confidential information method applies when the EMPS is working and the parties are in the process of implementing a labor contract. In cases where the labor relationship has ended, the employer cannot use this method to require employees to continue to keep their information and business secrets confidential. 

6. Non-disclosure agreement  (NDA) and non – compete agreement (NCA) 

In parallel with the labor contract, many employers often require employees to sign a Non-Disclosure Agreement (NDA) and a Non-Compete Agreement (NCA). An NDA and NCA can be two separate agreements with one focusing on information confidentiality commitments and the other on prohibiting competition with the employer (similar to non-compete clauses in labor contracts). In some cases, these agreements are combined into one document, commonly referred to as an NDA, where the non-compete agreement becomes a clause within the confidentiality agreement. 

Similar to how non-compete clauses in labor contracts are regulated, non-compete agreements also raise legal issues concerning their validity and enforceability.

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