To recap, there is a term of confidentiality implied into every contract of employment. This means that an employee is under an obligation not to disclose their employer’s confidential information to an unauthorized third party. Despite this duty being implied, it is often wise to bring home to an employee the existence of the obligation by including it as an express term which also defines the information that the employer classes as confidential. Express clauses strengthen the ability of an employer to discipline employees for disclosing confidential information or to seek injunctive relief from the court. This can be complemented by a confidentiality policy in the employee handbook.

When an employee moves job, they are generally free to use the skill, training and knowledge that they have acquired during their employment. This does not extend though to information that can be classed as “trade secrets”. The challenge is how to determine what this includes. One way is to ask the question ‘if this information were to be disclosed to a competitor, would it cause significant harm to the employer’s business?’ Ultimately, each case will turn on its own facts. Trade secrets can include secret manufacturing processes, designs or special methods of construction, customer lists, marketing plans and confidential price lists. In determining whether the criteria are met, a court will consider the nature of the employee’s employment, the nature of the information, whether its confidential nature was impressed on the employee and whether the information can be easily isolated from other information which the employee is free to use or disclose.

So how can a prudent employer best achieve this?

The confidentiality clause should define trade secrets as tightly as possible within the specific context of the business. This requires careful thought as there is a tightrope between being too blandly generic and being over prescriptive.

The employee should acknowledge that these matters do amount to trade secrets.

The nature of trade secrets in a business may change over time, as may the employee’s role, and so the wording of the clause should be kept under review, especially when an employee is promoted or starts a new role internally.

The employment contract should ensure that there is a clause requiring an employee to return confidential information (in whatever form) when employment terminates.

There should also be a clause requiring an employee to sign a statement confirming that they have fulfilled this obligation.

If the employer is still concerned about a departing employee working with a competitor, a letter can be sent to the new employer outlining the former employee’s express legal obligations. This letter will often have a ‘chilling effect’ on a new employer who wants to actively or implicitly induce a new employee into disclosing confidential information.

Another way to reduce the risk of disclosure to a competitor is to include appropriate restrictive covenants in the contract of employment.

This note is intended as a high level overview of this topic. Legal advice should always be sought on a case by case basis.

Share
X.com LinkedIn Email Save as PDF
More Publications
050-Insolvency-Restructuring-Grid-Image
3 Jul 2025

Insolvency law: secured creditors take note (Bermuda)

The recent judgment delivered by the Supreme Court of Bermuda in the matter of Harold J. Darrell hig...

Appleby-Website-Insurance-and-Reinsurance
2 Jul 2025

Bermuda: Education has helped investors get more comfortable as ILS continues to grow

It’s been an exceptionally busy and record first half of the year for the catastrophe bond sector,...

Appleby-Website-Privacy-and-Data-Protection
25 Jun 2025

Impact of Privacy Law on Bermuda Business

On 1st January 2025, Bermuda’s Personal Information Protection Act 2016 (PIPA) came into full forc...

Appleby-Website-Regulatory-Practice
25 Jun 2025

Simplified Due Diligence in Bermuda

Simplified Due Diligence (SDD) and Reduced Due Diligence (RDD) are critical features of a modern, ri...

Appleby-Website-Employment-and-Immigration
23 Jun 2025

Practical Tips for Conducting Workplace Investigations

Allegations of harassment, bullying or other misconduct in the workplace can create a legal mine fie...

Bermuda-1024x576-1
19 Jun 2025

Bermuda encourages investment with residential certificates

On March 31, 2023, the Bermuda Government replaced its previous tool intended to attract capital to ...

Appleby-Website-Insurance-and-Reinsurance
11 Jun 2025

Bermuda Paves the Way for Captive Insurers with New Stablecoin Policy

The Bermuda Monetary Authority (BMA) has announced a significant new policy framework that allows ca...

Appleby-Website-Insurance-and-Reinsurance
10 Jun 2025

Bermuda benefits from a strong and capital efficient regulatory regime

Bermuda’s long-term reinsurance sector is experiencing a new phase of complexity and scrutiny but ...

050-Insolvency-Restructuring-Grid-Image
9 Jun 2025

Bankruptcy & Restructuring – To Enforce, or not to Enforce

Bermuda’s flagship restructuring process is the appointment of provisional liquidators, whose powe...

ICLG Fintech 21 cover
5 Jun 2025

Digital transformation done right (Bermuda)

As any specialised tech lawyer or technology consultant will tell you, digital transformation projec...