Three Letters for Silence

I have been thinking about the nature of the NDA.

Contrary to popular belief, the NDA was not born because one person needed to shut another one up.

It came about for precisely the opposite reason: people needed to talk.

A company has to show an investor the numbers. A developer has to explain the technology. An employee has to be let near internal data. A buyer has to look under the bonnet before deciding what exactly he is buying.

The NDA builds a safe corridor for that conversation: what exactly is being disclosed, to whom, for what purpose, how that information may be used, how long the confidentiality lasts, and what the exceptions are. Quite often it also sets out a separate contractual penalty for breach. But three capital letters, all on their own, create neither a secret nor a title to somebody else's silence.

All of which came to mind because a couple of employment contracts had dropped into the blackbox, carrying the following crowning achievement of legal thought, and I have a nagging feeling it was delivered by an artificial intelligence:

“The employee undertakes to keep all private, business-related and security-related information strictly confidential, including after the employment relationship has ended.”

And the second one manages to go one better:

“The employee is subject to an unrestricted duty of confidentiality regarding all business matters. The validity of this confidentiality obligation does not expire when the employee leaves the company, but continues to apply.”

And that is it.

What counts as private, business-related or security-related information? Nobody thought it worth saying. Which particular facts are supposed to stay secret? Also a mystery. Who may they not be told to, what the exceptions are, where the boundaries of this duty run at all? Your guess is as good as mine.

There is no end date. There is no separate contractual penalty. There is one sentence, expected to throw a tarpaulin over absolutely everything, forever, and preferably tie it down at the corners.

Very economical legal drafting. Especially if the point is less about protecting a particular secret than about making sure the employee breaks into a light sweat at the mere sight of the letters NDA and, just to be on the safe side, is afraid to say anything at all about his time at the company.

Five minutes on the internet led me to a rather wonderful ruling of Germany's Federal Labour Court of 17 October 2024. The court was looking at almost exactly the same bright idea: a bog-standard catch-all clause binding a former employee to eternal silence about every internal matter of the employer.

And the court held the clause invalid. The wording of the decision itself is beautifully blunt: a standard contractual term that binds an employee, with no time limit whatsoever, to silence about all of the employer's internal processes even after the employment relationship has ended puts the employee at an unreasonable disadvantage and is therefore void. What is more, an employer who genuinely wants to protect a trade secret after an employee walks out of the door has to define with sufficient precision which secret it is he wants kept.

Which is more or less what I had worked out on instinct while reading those employment contracts and fuming: why the hell would anyone even try to cram a catch-all clause in there? There is no other plausible reason than to keep people from saying much about what had been going on inside the company. And a great deal had been going on. A little patience, dear reader.

And it is worth flagging one more distinctly inconvenient thing. An NDA does not turn information about possible wrongdoing into a secret merely because the employer would very much like to treat it as one. German law expressly provides for cases where information may be disclosed in order to uncover an unlawful act or professional misconduct and to protect the public interest.

Which brings us back to a rather simple thought: a lawful instrument cannot be turned into a means of achieving an unlawful end.

So today's conclusion for employers turns out to be a dull one: do not cut corners on lawyers. And, ideally, do not forget to pay their invoices either.

Although for the sake of my own story, and of the book to come, I have to admit I am delighted that certain employers manage to ignore both pieces of advice with quite remarkable consistency.