Legal basis for the decision
The Federal Labor Court ruled that formally agreed confidentiality obligations are invalid if they oblige the employee to maintain confidentiality regarding all internal processes beyond the end of the employment relationship for an unlimited period of time (so-called catch-all clauses). [1] The court based its decision primarily on the fact that post-contractual confidentiality obligations can only relate to individual, specifically defined business secrets if the employer has a predominant interest in the employee remaining silent, and that comprehensive clauses with no time limit are unreasonably disadvantageous to the employee against the background of Art. 12 Para. 1 GG within the meaning of Section 307 Para. 3 Sentence 1 in conjunction with Para. 1 Sentence 1 BGB. para. 1 sentence 1 BGB. The court also ruled that such catch-all clauses contradict the statutory concept of post-contractual non-competition clauses pursuant to Sections 74 et seq. HGB (German Commercial Code), because if such a clause was not agreed (which would only be permissible with compensation), the employee cannot be obliged not to compete with the employer without appropriate compensation. In this case, the employee may use the knowledge and experience acquired in the previous employment relationship, including trade and business secrets, in the new job. [2] A comprehensive and indefinite obligation to maintain confidentiality is effectively equivalent to a post-contractual non-competition clause. If such a confidentiality obligation is regulated by a catch-all clause without corresponding compensation, this serves exclusively the interests of the employer and unreasonably disadvantages the employee, according to the court.
Significance for practice
The ruling is of enormous significance in practice, as such clauses regularly form an integral part of standard employment contracts and have been common practice and an elementary component of employers' protection concepts with regard to trade and business secrets. If employers want to continue to have contractual protection in the future and avoid gaps in protection and liability risks for the responsible managers, the existing clauses must be adapted and, in particular, formulated in much greater detail.
Conclusion
The catch-all clauses often used as standard in employment contracts should be urgently reviewed and adapted to case law in order to prevent the loss of valuable know-how to the competition after employees leave the company.
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[1] BAG judgment of. 17.10.2024 - 8 AZR 172/23, available at: www.bundesarbeitsgericht.de/entscheidung/8-azr-172-23/
[2] Also BAG 19.5.1998 - 9 AZR 394/97; 15.06.1993 - 9 AZR 558/91
