German Court Rejects Protection for Employer Despite Data Theft: Why Precision in Contract Language Matters for Protecting Trade Secrets

An employee disclosed trade secrets, yet the employer’s request for injunctive relief was denied because the confidentiality clause in the employment contract was invalid. The German Federal Labor Court (BAG) held that the broadly worded “catch-all” clause placed an unreasonable disadvantage on the employee.

In a recent decision (BAG, 8 AZR 172/23), the German Federal Labor Court (BAG) heard a case where an employee transferred the sensitive information of his employer to a potential competitor. The facts were clear: the employee, acting under a pseudonym, sent several emails with attachments to the shareholders of a competing company. This was held to be a violation of German trade secret law.

Nevertheless, the employer’s request for injunctive relief was rejected. The reason was not the lack of a violation, but the defective confidentiality clause in the employment contract.

The clause was drafted extremely broadly: it covered not only “business and trade secrets,” but also all other matters and processes of the company that came to the employee’s knowledge in the course of his work. In addition, it imposed this duty of confidentiality indefinitely, including after the termination of employment. The court considered this “catch-all” formulation an unreasonable disadvantage for the employee. As a result, the entire clause was invalid and could not serve as a legal basis for injunctive relief.

Key Points for Employers

Without valid contractual language, companies may struggle to obtain injunctions or damages in court, even when trade secrets are misappropriated.

• German courts apply strict scrutiny to confidentiality clauses in employment contracts. Overly broad or unlimited obligations will often be struck down.
• Even in cases of clear misconduct, the employer may be left without an enforceable contractual remedy if the clause is invalid.
• Employers should ensure that NDAs and contractual confidentiality provisions are tailored, reasonable in scope, and aligned with the German Trade Secrets Act (GeschGehG), which implements the EU Trade Secrets Directive.

For U.S. employers or multinationals with staff in Germany, generic “catch-all” confidentiality language will likely not hold up in court. Clauses must be clearly drafted, limited to actual trade secrets and sensitive business information, and reasonable in duration. Otherwise, the company risks being unprotected in precisely the situations where protection is most needed.