Employee confidentiality: duties before, during and after employment

Service page: Employment lawyer: dismissals, wages and severance pay.

You left your job and moved to a competitor. The education you gained and the contacts you built are yours. But customer files you took out, pricing information held by your old employer, and code you developed are not yours, even after you have left. The line is not always clear, and this is where it gets complicated.

What does the law prohibit, even if you signed nothing?

Every employee in Israel owes a duty of loyalty to their employer. It comes from the duty of good faith in section 39 of the Contracts (General Part) Law and from the extensive case law of the labor courts. No NDA is needed for the duty to apply.

What this means in practice: you do not pass the employer’s information to competitors. You do not use customer relationships for your own benefit. You do not take home files you did not ask permission to take.

In addition, using the employer’s infrastructure for a competing business, working in parallel for a direct competitor (unless this was permitted), and stealing intellectual property (code, designs, formulas) are all prohibited, and can lead to immediate dismissal and a lawsuit.

Will the Labor Court enforce every clause in a non-disclosure agreement (NDA) with an employee?

A non-disclosure agreement adds to the basic duty specific protections that the parties agreed on. But not every NDA is enforced as written.

The Labor Court will examine whether the agreement protects a legitimate and defined interest (a trade secret, customer information, technology). An NDA that tries to silence an employee from any activity in the field they learned may not be enforced.

A clause that prevents an employee from working in their profession after leaving crosses into a non-compete clause, and there the law strongly protects the employee. Such a clause will be enforced only if it protects a legitimate interest of the employer and is reasonable (Labor Appeal (ע״ע) 164/99 Frumer v. Redguard Ltd.).

After employment ends: how far does the duty go?

After you leave, the duty of confidentiality continues, but only for real trade secrets.

What does count as a secret: a unique formula, a customer database built with effort, an internal process not known to the public. What does not count as a secret: professional experience you gained, skills you developed, general knowledge of the field that is available in the market.

The employee is entitled to earn a living. A trade secret is only business information that is not public knowledge and cannot easily be discovered lawfully, whose secrecy gives its owner a business advantage, and whose owner takes reasonable measures to keep it secret (section 5 of the Commercial Torts Law). And knowledge that has become part of the employee’s general professional skills creates no liability (section 7(a)(1)).

I copied my employer’s files before I left. What is my exposure?

If the information is a trade secret, using it without the employer’s consent and in breach of a contractual obligation or a duty of trust is “misappropriation of a trade secret”, even if no NDA was signed (section 6(b)(2) of the Commercial Torts Law). In such a lawsuit, it is presumed that the employee used the secret if they had access to it and the information they use is substantially similar to it (section 10). The lawsuit is heard in the Regional Labor Court, and a single judge may grant a temporary injunction in it (section 22). So it is a good idea to return the employer’s materials before you leave and to document the return in writing.

What happens when there is a breach, and what do you do if you were sued?

An employer who discovers a breach of confidentiality can sue for an urgent injunction (to stop the breach at once), compensation for actual damage, and the return of profits the employee made. In misappropriation of a trade secret, the court may also award, at the plaintiff’s request, compensation without proof of damage: up to NIS 100,000 for each tort (section 13 of the Commercial Torts Law).

Have you received a warning letter? Do not ignore it, and do not act out of fear. Check with an employment lawyer: does the information you are said to have disclosed meet the definition of a “trade secret”? Is every part of the NDA you signed valid? A considered reply may resolve the dispute before it even reaches the court.