Confidentiality and the duty of loyalty as an employee in Denmark

Every employee in Denmark is subject to two basic duties towards their employer: confidentiality and a duty of loyalty. These duties apply even if they are not always expressly mentioned in the employment contract, and a breach of them can have serious consequences for the employee.

But what do the duties involve precisely? When are they breached, and what is the consequence? And what should your employment contract say expressly about the subject?

The duty of loyalty: the basic principle

The duty of loyalty is an unwritten duty. It does not follow directly from a single statute but is a general employment-law principle established through case law. It requires the employee not to act against the employer's legitimate interests in work-related matters.

The duty of loyalty is not just doing your job well. It prohibits the employee from acting against the employer's interests.

What is contrary to the duty of loyalty?

1. Competing business. An employee may as a rule not, either in working hours or in their free time, run or take part in a business that competes with the employer. This applies even if the contract does not contain a non-compete clause. The duty of loyalty prohibits directly competing activity while the employment runs, while a non-compete clause governs any restraint period after the employment.

2. Using the employer's resources for one's own purposes. Using the employer's time, equipment or resources for personal projects, including preparing a competing business, is a breach of loyalty.

3. Negative comments about the employer. Employees have freedom of expression, but it is limited by the duty of loyalty. Grossly derogatory statements about the employer, especially towards customers, suppliers or the public, can amount to a breach of loyalty that can justify a summary dismissal.

4. Recruiting colleagues to leave the company. Actively recruiting colleagues to a new employer while you are still employed is a breach of loyalty.

5. Theft, fraud and dishonesty. The duty of loyalty covers all forms of dishonesty towards the employer, not just criminal acts.

What is not contrary to the duty of loyalty?

The duty of loyalty is not absolute. The following is as a rule permitted:

• Looking for a new job. An employee always has the right to look for new work
• Objective internal criticism. The right to make objective, internal criticism of the employer's decisions is protected
• Whistleblowing. Reporting unlawful matters via the right channels is protected
• Trade union organisation. Participation in trade union organisation and negotiation is protected

Confidentiality: what is confidential?

Confidentiality is the employee's duty not to disclose the employer's confidential information to unauthorised persons. It is supplemented by the Act on trade secrets, which gives businesses a legal right to protection of confidential business information.

What is confidential information?

Confidentiality typically covers:

• Trade secrets: production methods, pricing strategies, business plans and customer databases
• Customer information: the identity and terms of customer relationships
• Employee information: pay and personnel matters
• Technological knowledge: software, inventions under development and technical methods
• Financial information: turnover, budgets and investment plans

The Act on trade secrets

The Act on trade secrets came into force in 2018 and implements the EU Trade Secrets Directive (2016/943). The Act protects businesses' confidential business information against three forms of interference:

1. Unlawful acquisition (for example theft, hacking or abuse of trust)
2. Unlawful use (using secrets that have been unlawfully obtained)
3. Unlawful disclosure (sharing them with third parties)

For information to be protected as a trade secret, it must:

• Be secret and not generally known
• Have commercial value precisely because it is secret
• Be subject to reasonable steps to keep it secret (access restriction, marking etc.)

The Act gives the business the right to seek an injunction and damages on a breach.

Confidentiality after the end of the employment

Confidentiality survives the employment. An employee who leaves the company may not take confidential information with them or use it for a new employer's benefit.

The contract should state that confidentiality applies for a defined number of years after the end of the employment, or without time limit for the most sensitive information.

Confidentiality clauses in the employment contract

Even though confidentiality applies automatically to some extent, it is strongly recommended to have an express confidentiality clause in the employment contract. A written clause:

• Makes it clear to the employee what is regarded as confidential
• Gives a stronger legal basis on a breach
• Can state the duration and scope of the duty after the employment
• Can contain a duty to return material on the end of the employment

Elements of a good confidentiality clause

Definition of confidential information: a broad but precise definition covering technical know-how, commercial information, customer data and internal processes.

Exceptions: generally available information is not confidential, and the same applies to information the employee knew before the employment.

Scope of the obligation: what may the employee not do with confidential information (disclose it, use it for their own purposes or share it with competitors)?

Duration: does the clause apply without time limit or for a specific period after the employment? Consider a few years for commercial information and no time limit for genuine technological know-how.

Return on departure: the employee undertakes to return all material (physical and digital) with confidential information on the end of the employment.

Summary dismissal on a breach of loyalty or confidentiality

Serious breaches of the duty of loyalty or confidentiality can give the employer the right to summary dismissal, that is dismissal without notice. This requires the breach to:

• Be material
• Be documentable
• Give the employer a justified loss of trust in the employee's continued employment

Examples that can justify a summary dismissal:

• Disclosure of trade secrets to a competitor
• Starting a competing business while employed
• Using the customer list to recruit customers to a new business
• Gross defamation of the employer towards customers

Whistleblowing and the limit of freedom of expression

Employees who report legal breaches or serious matters via the right whistleblower channels are protected against reprisals, even if it concerns confidential information.

The Whistleblower Act, which came into force in 2021, protects employees who in good faith report breaches of EU law or serious breaches of Danish law. Confidentiality cannot be used as a shield against whistleblowing within the framework of the Act.

NDA for employees vs. self-employed people

Self-employed consultants and freelancers are not automatically subject to the employment-law duties of loyalty and confidentiality. For them, it is even more important to have an express confidentiality agreement (NDA) in the contract.

Frequently asked questions

Can an employee look for a new job with a competitor?

Yes. Employees have the right to look for new work, also with competitors. But while they are still employed, the duty of loyalty applies, and they may not actively prepare a competing business, recruit colleagues or use confidential information for the new employer's benefit.

Does confidentiality apply even if the contract does not mention it?

Yes. To some extent, an unwritten duty of confidentiality applies based on case law. But an express clause gives a far better legal basis on a breach.

What is the consequence of a breach of loyalty?

It depends on the severity. Minor breaches can lead to a written warning, while serious breaches can lead to summary dismissal and a claim for damages.

Can you contract out of the duty of loyalty?

No. The duty of loyalty is a fundamental part of the employment relationship and cannot be removed by agreement. It can, however, be specified and clarified in the contract.

Is it lawful to take customers' contact details on departure?

No. A customer database is typically a trade secret that belongs to the employer. Taking it with you is a breach of confidentiality and can, depending on the circumstances, be criminal.

Conclusion

The duties of loyalty and confidentiality protect the business, but only if they are correctly worded in the employment contract and communicated to the employees. Ensure a clear confidentiality clause, define what is confidential, and remember that both employees and self-employed consultants should be bound by clear, written agreements.

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The content of this article is for guidance only and does not constitute legal advice. Consult an employment-law adviser for advice on your specific situation.