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Blowing the lid off confidentiality obligations for whistleblowers

02 May 2024

Confidentiality clauses in employment contracts typically aim to protect an employer’s confidential information, however there are limitations to the extent to which they can restrict whistleblowing activities

Workers who “blow the whistle” on their employers generally have the right not to be dismissed or otherwise penalised as a result. Whistleblowing laws and policies are therefore designed to encourage employees to come forward without fear of retaliation, however confidentiality or non-disclosure agreements often act as deterrents from doing so.

Overriding confidentiality

Confidentiality clauses in employment contracts can restrict employees from disclosing an employer’s proprietary information, trade secrets, and other confidential information both during and after their employment. Employees who blow the whistle on their employers for illegal or unethical activities may, therefore, inadvertently be in breach of their contractual obligations.

While confidentiality obligations can restrict employees from disclosing certain confidential information, they should not in principle act as a shield for employers against legitimate whistleblowing activities. The extent to which a confidentiality clause can restrict an employee from blowing the whistle will naturally depend on a number of factors including jurisdiction, wording of the employment contract and any applicable laws and/or policies in place to protect whistleblowers.

In some jurisdictions, there is specific legislation in place to safeguard whistleblowers from retaliation, regardless of any confidentiality obligations they may have under the contracts of employment.

For example, in the US, federal whistleblowers laws such as the Defend Trade Secrets Act require employers to include ‘carveouts’ in confidentiality, non-disparagement and severance agreements to exclude legitimate whistleblower activity.

In the UK, any provision in an agreement, whether it is the employee’s contract or otherwise, is void insofar as it purports to prevent them from making a ‘protected disclosure’. In simple terms, a protected disclosure involves the disclosure of information relating to a certain specified kind of malpractice. There must be a reasonable belief on the part of the employee that the information disclosed reasonably discloses the malpractice and that disclosure of the information would be in the best interest of the public. The disclosure will only amount to a protected disclosure if it is made to the right person in the right circumstances, as specified in the relevant legislation.

Hong Kong

There is currently no specific or single piece of legislation which protects whistleblowers in Hong Kong. Piecemeal provisions across various ordinances may provide protection to whistleblowers in specific circumstances. For example, under the Employment Ordinance (Cap. 57), an employer is prohibited from terminating employment by reason of the employee giving evidence in proceedings or giving information to a public officer of the Labour Department in any inquiries relating to the enforcement of the Ordinance. Under the various discrimination-related ordinances it is unlawful to discriminate against another person on the grounds that the person victimised has brought proceedings against the discriminator or given evidence or information in connection with proceedings brought by others against the discriminator. If discrimination is established, the Court has the power to order the discriminator to employ, re-employ or promote the person victimised, or to make an order for damages.

The laws and regulations of Hong Kong primarily focus on listed companies and only protect disclosures made externally to regulators including the SFC and HKMA, or in respect of reportable crimes or in connection with ongoing proceedings. Accordingly, there is currently no general obligation for non-listed companies in Hong Kong to adopt and implement whistleblowing polices, or any requisite guidance as to how they should be drafted.

Commentary and practical tips for employers

Since 1 January 2022, listed companies in Hong Kong were required to adopt anti-corruption and whistleblowing policies. Although there is still no legal requirement for employers of private companies to adopt whistleblowing policies, employers should in any event have the appropriate mechanisms in place to ensure that concerns raised in the workplace are dealt with promptly and appropriately and that those raising concerns do not face retaliation. This may be through the use of the employer’s grievance procedures, although increasingly employers are adopting specific whistleblowing or “speaking up” policies.

This is not to say that employers should not still take all efforts to safeguard their confidential information. Employees should still be reminded of their contractual and implied duties of confidence, however it is good practice to draft contractual confidentiality clauses and NDAs in settlement agreements in a way that expressly excludes protected disclosures as under the relevant legislations.

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