The Draft Labor Code – A Ray of Light in Protecting Trade Secrets

Due to the rapid development of digital technologies and the increasing attention to intellectual property, the issue of protecting trade secrets is becoming more and more relevant.

It is no secret that in today’s reality, it is quite difficult for an employer to hold an unscrupulous employee accountable for disclosing valuable commercial information, let alone fire them.

According to current legislation, to protect their trade secrets, an employer must take a number of actions, including: amending the charter – it is necessary to specify in the charter that the company operates under a trade secrets regime; approving a policy on trade secrets; including a clause in employment contracts requiring employees to maintain trade secrets and comply with the rules/conditions of the trade secrets policy; and the mandatory signing of a separate (civil law) non-disclosure agreement with employees regarding trade secrets.

The current Labor Code does not provide for the responsibility of an employee for disclosing trade secrets. Therefore, if an employer learns that an employee has disclosed protected trade secrets during the course of their employment, firing that employee quickly will not be possible. In this case, the employer will have to proceed through the process of a disciplinary violation (such as failure to follow internal company rules), leading to corresponding disciplinary sanctions: a warning ⇾ repeat violation within one year ⇾ dismissal. Otherwise, the employer risks long legal battles over wrongful dismissal, with subsequent compensation payments. As practice shows, this is a lengthy process (especially when the employee is stubborn and aware of their rights). Moreover, considering that after receiving the first warning, the employee will do everything possible to avoid a second, the process is not only lengthy but also complicated.

A light at the end of the tunnel is the new draft Labor Code of Ukraine, which includes provisions requiring employees to maintain trade secrets. Most importantly, disclosing such secrets can lead to dismissal at the employer’s initiative, and this right is established as a direct legal norm, which eliminates any subsequent misinterpretation of the law.

However, it should be noted that this provision in the new Labor Code can only be applied if the employee has signed a non-disclosure agreement for trade secrets or if the employment contract contains a clause about non-disclosure of trade secrets related to their job duties.

Currently, a large number of amendments have already been made to the draft law, and we believe this is not the limit. At the same time, we sincerely hope that the outlined direction of regulating the relationship between employers and employees concerning the protection of trade secrets will remain unchanged.

Please note that this publication is not legal advice and is provided for informational purposes only. If you have a specific issue related to this publication, we recommend seeking a full consultation with our specialists.

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