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Confidentiality clause (employment) Q&A: South Korea

2021.07.13

South Korea-specific information concerning the key legal and commercial issues to be considered when drafting a confidentiality clause for use in the terms of employment between the employer and employee. See <a href="https://uk.practicallaw.thomsonreuters.com/w-018-2988?originationContext=document&vr=3.0&rs=PLUK1.0&transitionType=DocumentItem&contextData=(sc.Default)">Standard clause, Confidentiality clause (employment): International</a>, with country-specific drafting notes and <a href="http://uk.practicallaw.thomsonreuters.com/w-005-3898?originationContext=document&vr=3.0&rs=PLUK1.0&transitionType=DocumentItem&contextData=(sc.Default)">Standard document, Terms of employment: International</a>. 
 
See also <a href="https://uk.practicallaw.thomsonreuters.com/9-200-2130?originationContext=document&vr=3.0&rs=PLUK1.0&transitionType=DocumentItem&contextData=(sc.Default)">Standard clause: Confidentiality clause (long form)</a>. 
 
 
Implied duty of confidentiality 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">1. Is there any implied duty of confidentiality in the employment relationship under the laws of your jurisdiction? If so, please explain it.</div>
 
Yes, the courts in South Korea have recognised a duty of confidentiality on the employee's part in relation to trade secrets that they have obtained during employment (Supreme Court Decision 96Da31574, 26 November 1996). A duty of confidentiality regarding knowledge of trade secrets acquired during employment can also continue after termination of the employment relationship, where this would be reasonable in the circumstances and would not have an impact on the employee's freedom of occupation (Supreme Court Decision 96Da31574, Nov. 1996). 
 
However, it is common to include a confidentiality clause in an employment contract to clarify this responsibility, especially regarding the obligations of confidentiality after termination of the employment relationship. 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">2. Are there any other duties under the laws of your jurisdiction that could be relevant to confidentiality in the employment relationship?</div>
 
Yes, there are two additional duties that might be relevant:
<ul>
	<li>Trade secrets.</li>
	<li>Breach of duties of occupation.</li>
</ul>
 
 
Trade secrets 
 
A person who damages the business interest of another who possesses trade secrets is liable for compensation for that damage (Article 11, Unfair Competition Prevention and Trade Secret Protection Act) (Unfair Competition Prevention Act). 
 
The disclosure of trade secrets is punishable by either:
<ul>
	<li>Imprisonment with labour for a maximum of 15 years.</li>
	<li>A fine not exceeding KRW1.5 billion and a fine equal to two to ten times the amount of profit made through disclosure of the trade secrets, depending on circumstances.</li>
</ul>
 
(Article 18, Unfair Competition Prevention Act.) 
 
However, for information to be considered a "trade secret" and protected by law, that information must be managed as a trade secret by the company. If the company has not put the appropriate protections in place, the information will not be considered to be a trade secret, and will therefore not be protected by law. 
 
 
Breach of duties of occupation 
 
It is also an offence for a person, in breach of the duties of their occupation, to obtain pecuniary advantage or cause a third person to do so, thereby causing loss to the employer (Article 356, Criminal Act).  
 
It has been seen as an occupational breach of trust where an employee leaked trade secrets while in employment, or took out that information without permission, for their own interest (Supreme Court Decision 2006Do9089, 24 April 2008). 
 
 
Definitions 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">3. Is there any definition of confidential information in your jurisdiction that is required by law or standard practice in confidentiality clauses?</div>
 
It is difficult to find a general definition for confidential information. There is no legal requirement to include a particular definition in confidentiality clauses. However, Article 2(2) of the Unfair Competition Prevention Act defines "trade secret" means: 
"Information, including a production method, sale method, useful technical or business information for business activities, that is not known publicly, is managed as secret, and has independent economic value." 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">4. Is the term "group company" recognised in your jurisdiction? If so, please can you set out an appropriate definition.</div>
 
Yes, this term is recognised in South Korea. 
 
"Group company" usually has a similar meaning to "affiliate company". Where two or more companies belong to the same business group, each company is called an affiliate of the others (Article 2(3), Monopoly Regulation and Fair Trade Act).  
 
The term "business group" means a group of companies, the business of which is substantially controlled by the same person according to the criteria prescribed by Presidential Decree as classified below:
<ul>
	<li>Where the same person is a company, a group comprised of such person and one or more companies controlled by that person.</li>
	<li>Where the same person is not a company, a group comprised of two or more companies controlled by that person.</li>
</ul>
 
(Article 2(2), Monopoly Regulation and Fair Trade Act.) 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">5. Are the terms "subsidiary" and "holding company" defined and recognised under the laws of your jurisdiction? If so, please can you set out an appropriate definition for Standard clause, Confidentiality clause (employment): International.</div>
 
Yes, these terms are recognised in South Korea. 
 
However, "subsidiary" has different meanings in the Commercial Act and in the Monopoly Regulation and Fair Trade Act, so the term is used differently depending on the circumstances. 
 
Below we define it as in the Monopoly Regulation and Fair Trade Act, which is more commonly used in the context of employment relationships. 
 
 
Subsidiary 
 
The term "subsidiary" means a domestic (South Korean) company, the business of which is controlled by a holding company that satisfies the conditions prescribed by Presidential Decree (Article 2(1)-3, Monopoly Regulation and Fair Trade Act). 
 
The term "second-tier subsidiary" means a domestic (South Korean) company, the business of which is controlled by a subsidiary that satisfies the conditions prescribed by Presidential Decree (Article 2(1)-4, Monopoly Regulation and Fair Trade Act). 
 
 
Holding company 
 
The term "holding company" means a company the main business of which is to control the business activities of a domestic (South Korean) company by holding the shares (including equities) in the domestic (South Korean) company and total assets (as defined) of which are not less than or equal to the amount prescribed by Presidential Decree (KRW500 billion). The aggregate value (as defined) of shares (as defined) that a holding company holds in its subsidiaries must be 50% or more of the total assets held by the holding company (Article 2(1)-2, Monopoly Regulation and Fair Trade Act). 
 
 
Information already in the public domain 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">6. In your jurisdiction, is it a requirement or common practice for information that is already in the public domain to be excluded from the confidentiality restrictions in Standard clause, Confidentiality clause (employment): International?</div>
 
Yes. The Supreme Court has held that information known to the public cannot be considered a trade secret even when it is managed as a trade secret by the possessor. "Not known publicly" means that one normally cannot obtain the information without going through the possessor of the information (Supreme Court Decision 2002Da60610, 23 September 2004; see also Incheon District Court 2019Gahap62238, 5 February 2021).  
 
It should be noted that the Supreme Court has also held that technology information can still be considered a trade secret where it has been discovered through reverse engineering (Supreme Court Decision 98Do4704, 12 March 1999; see also Changwon District Court 2017No2861, 17 May 2018). 
 
 
Best endeavours 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">7. Is the concept of best endeavours recognised in your jurisdiction? If not, is there equivalent wording that could be used in Standard clause, Confidentiality clause (employment): International.: clause 1.3?</div>
 
There is no concept of "best endeavours" for an employee's confidentiality responsibility, although a responsibility based on the "principle of good faith" is recognised (Supreme Court Decision 96Da31574, 26 November 1996).  
 
However, since the expression "best endeavours" is also commonly used in contractual terms to make employees keep the "principle of good faith", one can also define such responsibility as "best endeavours".  
 
 
Return of company property 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">8. In your jurisdiction, can Standard clause, Confidentiality clause (employment): International.: clause 1.4(b) be included to ensure the deletion of confidential information from personal email accounts and personal accounts on websites, such as professional networking sites, that may have been used during the course of employment?</div>
 
Yes. There is no restriction on an employer's ability to require employees to delete confidential information from personal email accounts and personal accounts on websites, such as professional networking sites, that may have been used during the course of employment. 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">9. Is it common practice in your jurisdiction to include provision to require the employee to provide a signed statement that they have complied fully with their obligation to return company property as required under Standard clause, Confidentiality clause (employment): International.: clause 1.4(c)?</div>
 
Yes. It is not uncommon to require a separate, signed confidentiality statement as in Standard clause, Confidentiality clause (employment): International.: clause 1.4(c). 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">10. Is there anything else that it would be common practice to include in the return of company property Standard clause, Confidentiality clause (employment): International.: clause 1.4 in your jurisdiction?</div>
 
Standard clause, Confidentiality clause (employment): International.: clause 1.4 has most features that would commonly be seen. However, we would advise the addition of more clauses specifically geared to the employee's position, that specify (non-exhaustively) some key information that particular employee has to return on termination of employment, to prevent possible further confusion or disputes. 
 
 
Whistleblowing 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">11. Is whistleblowing recognised in your jurisdiction? If not, is there an equivalent concept for a worker reporting wrongdoing?</div>
 
Yes, it is (see Question 12). 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">12. What is the applicable legislation in relation to whistleblowing (or equivalent) in your jurisdiction? </div>
 
The Protection of Public Interest Reporters Act protects whistleblowers when they report in the public interest. 
 
The term "whistleblower" means a person who files a public interest report (Article 2(4), Protection of Public Interest Reporters Act). 
 
The term "public interest report" means to file a report of, make representations of, provide information about, make a complaint or bring a charge of the fact that any act detrimental to the public interest has been committed or is likely to be committed, or to provide a lead for investigation into any act detrimental to the public interest to persons such as employer, relevant administrative agencies, or investigative agencies (Article 2(2) and 2(6), Protection of Public Interest Reporters Act) (Article 5, Protection of Public Interest Reporters Act). 
 
The Protection of Public Interest Reporters Act also protects whistleblowers (a public interest reporter) through measures such as:
<ul>
	<li>The duty to maintain the confidentiality of whistleblowers (Article 12).</li>
	<li>Personal protection measures (Article 13).</li>
	<li>A prohibition on disadvantageous measures (Article 15).</li>
	<li>The ability for the whistleblower to request protective measures from the authorities when the whistleblower has been disadvantaged (Article 17).</li>
</ul>
 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">13. Should the applicable legislation relating to whistleblowing (or equivalent) be specifically referred to in Standard clause, Confidentiality clause (employment): International.: clause 1.5? Is there any other wording that should be stated in this clause?</div>
 
Legislation specifically referred to in clause 1.5 
 
There is no need or statutory requirement for the Protection of Public Interest Reporters Act to be referred to specifically in Standard clause, Confidentiality clause (employment): International.: clause 1.5.  
 
There is also no requirement for employers even to include a clause covering whistleblowing, as this protection is given automatically. 
 
The "2019 Standard Rules of Employment" from the Ministry of Labour and Employment (which provide suggested, but not compulsory, standard employment terms and conditions) include a whistleblowing provision that "confidentiality clauses do not apply to employees who are considered 'public interest reporters' as defined in the 
Protection of Public Interest Reporters Act". 
 
 
Any other wording to be specifically referred to in clause 1.5 
 
There is no other wording that must be included in the policy in addition to clause 1.5. In South Korea, it is not common to include clauses expressly protecting whistleblowers. 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">14. Could a confidentiality clause be void in your jurisdiction if it prevents the employee from whistleblowing (or equivalent)?</div>
 
Yes. 
 
Where the provisions of a collective agreement, employment contract or supply contract, among other things, prohibit or restrict a public interest report, these provisions are void (Article 14(5), Protection of Public Interest Reporters Act). 
 
Even where classified information in respect of a person's duties is included in the details of a public interest report, among other things, a whistleblower will not be deemed to have breached their official duty to maintain confidentiality under other statutes, a collective agreement or the rules of employment, among other things (Article 14(3), Protection of Public Interest Reporters Act).  
 
The Anti-Corruption and Civil Rights Commission, the relevant administrative agency, also clarifies in its manual that even confidential information of a company can be included in public interest reports; a clause in an employment contract prohibiting or restricting such reporting would be void, and there would not be a breach of the clause even if the employee reports that confidential information (Anti-Corruption & Civil Rights Commission 2020 Manual for Protection of Public Interest Reporters Act by Clause, page 93). 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">15. Is it a legal requirement in your jurisdiction for there to be a specific "carve out" for whistleblowing (or equivalent) otherwise the entire clause would be void in its entirety?</div>
 
Legal requirement for "carve out" for whistleblowing (or equivalent) 
 
There is no legal restriction to include a "carve out" clause in confidentiality clauses. 
 
Entire clause void without "carve out" for whistleblowing (or equivalent) 
 
Not including a "carve out" clause in confidentiality clause will not make the entire clause void. If there is a provision to prohibit or restrict public interest reporting, just that provision will be void under Article 14(5) of the Protection of Public Interest Reporters Act. 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">16. What terminology should be included in Standard clause, Confidentiality clause (employment): International.: clause 1.5 in relation to whistleblowing (or equivalent)?</div>
 
It should be referred to as whistleblowing. 
 
 
Execution and other formalities 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">17. Does Standard clause, Confidentiality clause (employment): International. have to be in writing in your jurisdiction in order for it to be valid and enforceable? Are there any language requirements? </div>
 
Does the clause need to be in writing? 
 
There are no statutes that make employers include these clauses in written form. However, it is common to have them in writing to prevent future disputes. 
 
 
Language 
 
There are no language requirements., although to prevent further disputes, we would advise that these clauses be in writing in Korean or other relevant languages, if the employer employs South Korean employees. 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">18. What are the execution and other formalities that are required for Standard clause, Confidentiality clause (employment): International. to be valid and enforceable in your jurisdiction?</div>
 
There are no specific formalities for Standard clause, Confidentiality clause (employment): International. However, we would advise the addition of more clauses specifically geared to the employee's position, that specify (non-exhaustively) some key information that particular employee has to return on termination of employment, to prevent possible further confusion or disputes. 
 
 
General 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">19. Are any of the parts of Standard clause, Confidentiality clause (employment): International. not legally valid and enforceable or not standard practice in your jurisdiction?</div>
 
No. Standard clause, Confidentiality clause (employment): International. is legally valid and enforceable. 
 
 
<div style="background:#eeeeee;border:1px solid #cccccc;padding:5px 10px;">20. Are there any other standard clauses or wording that would be usual to see in a clause such as Standard clause, Confidentiality clause (employment): International. and/or that are standard practice to include in your jurisdiction?</div>
 
Standard clause, Confidentiality clause (employment): International. covers most parts of confidentiality. But generally, such clauses state that violation of the confidentiality clause could be a disciplinary cause (that is, if the violation is not considered a public interest report) and result in disciplinary action. But this disciplinary wording does not have to be included in the confidentiality clause. The employer can include this in the disciplinary section of the employment contract or the rules of employment with other disciplinary causes as well as, or instead of, including it in the confidentiality clause itself. 
 
Statutes such as the Unfair Competition Prevention Act will determine whether information is considered a "trade secret" regardless of clauses in employment contracts or other policies. Therefore, it does not need to be defined as a trade secret in Standard clause, Confidentiality clause (employment): International. However, this type of information needs to be treated as a "trade secret" by the employer in order to be afforded the extra, statutory, protection under the Unfair Competition Prevention Act. If it is not, then the employer will only have the option of a contractual claim for breach of the confidentiality clause.

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+82-2-6200-1937 khbaek@jipyong.com

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