Employees with access to confidential information: What does the new German Trade Secrets Act (“GeschGehG”) mean for employers?

Employers are well advised to particularly protect their corporate know-how. The coming into effect of the new German Trade Secrets Act (“GeschGehG”) requires quick action, not least because there is no transition period. By means of the GeschGehG, the German legislator implemented Directive (EU) 2016/943 of the European Parliament and of the Council of June 8, 2016. The implementation was not within the deadline (June 9, 2018); however, the labor courts had already been required to observe the directive’s provisions. Therefore, it is high time for employers to check for required actions and to make adjustments, if applicable.

Since April 26, 2019, the law on the protection of trade secrets has been in effect (cf. also https://www.bakertilly.de/news/detail/das-gesetz-zum-schutz-von-geschaeftsgeheimnissen-geschgehg-ist-in-kraft.html). Previously, the term of trade and business secrets had not been defined under German law. Therefore, employment contracts often included a corresponding definition. Art. 2 No. 1 GeschGehG now contains a legal definition, according to which a trade secret is any kind of information being confidential and therefore of economic value, subject to appropriate confidentiality measures by its legal owner, and subject to a legitimate interest in keeping the information secret.

Employer must take and prove appropriate confidentiality measures

The new definition confronts companies with significant challenges. According to previous case law it was sufficient if there was a subjective intention to maintain secrecy. It was sufficient if such intention to maintain secrecy was established by the nature of the information to be kept confidential. Now, according to GeschGehG, trade secrets will only be protected if the employer takes and can prove to have taken appropriate confidentiality measures. Such measures may include contractual, technical, organizational or legal/labor-law related measures, such as compliance trainings for employees or instructions to employees having access to information declared to constitute a business secret. Measures already taken pursuant to Art. 32 General Data Protection Regulation (GDPR) can be favorable in connection herewith.

According to Art. 1 Sec. 3 No. 4 GeschGehG, rights and obligations arising from the employment and the employee representatives’ rights must remain unaffected by the law. According to the explanatory memorandum, this is intended to ensure that individual contractual agreements in the employment contract will not be circumvented, the labor courts’ case law on employees’ occupational mobility will not be impaired and former employees will be allowed to further use their honestly obtained professional knowledge also after their resignation, even if such knowledge overlaps with the employer’s trade secrets and the employee has not obtained the information dishonestly. Furthermore, the GeschGehG is not supposed to influence the employee representatives’ rights to information, consultation and co-determination. However, employers might have to take compliance measures and make contractual amendments.

Practical tip

Employers should screen their company and record any information which must be kept secret. They should develop a comprehensive secrecy plan in order to identify, for example, employees who will – exclusively – be granted access to certain information. This will also provide for a documentation of all appropriate confidentiality measures taken. Within the scope of such plan, all other protective measures can be determined, such as the introduction of passwords and codes for a certain group of employees having access to sensitive information. For such employees it would also be advisable to implement provisions beyond the customary confidentiality regulations contained in the employment contract. Within the scope of confidential projects, for example, non-disclosure agreements might be advisable for the involved employees.

Employment contracts’ confidentiality clauses should not be subject to mandatory changes due to the GeschGehG. However, employment contracts should be reviewed as to whether or not the confidentiality and secrecy clauses, in particular definitions of trade secrets contained in such clauses, comply with GeschGehG. If the employment contracts should not contain such confidentiality clauses, they should be included in future.

Furthermore, post-contractual non-competition clauses might be an appropriate confidentiality measure pursuant to Art. 2 No. 1 b GeschGehG, which might be advisable for some employees. The GeschGehG should not directly affect already existing post-contractual non-competition clauses. According to the explanatory memorandum, in particular the agreement of grace periods shall remain unaffected.