On 12 March 2014, the President of the Russian Federation signed Federal Law No. 35-FZ “On Amendments to the first, second, third and fourth parts of the Civil Code of the Russian Federation and Certain Legislative Acts of the Russian Federation” (the “Law”).

The Law, which amends Federal Law No. 98-FZ “On Commercial Secrets” (the “Law on Commercial Secrets”), will come into force on 1 October 2014.

Overall, the changes are aimed at increasing the protection of the rights and legitimate interests of those who hold information constituting a trade secret (“Confidential Information”), including in the framework of labour relations. However, many of the changes, in fact, only revive similar principles that were contained in previous versions of the Law on Commercial Secrets and which had been repealed on 1 January 2008 as a result of the entry into force of the fourth part of the Russian Civil Code.

New provisions

The Law expressly re-establishes the duty of the employee to compensate the employer for losses if the employee is guilty of the wrongful disclosure of Confidential Information that became known to them in the performance of their employment duties.

The employer may claim compensation for losses caused by the disclosure of Confidential Information not only from current employees, but also from former employees, if the information was disclosed by them while the trade secret regime was in place within the organisation.

The obligation to compensate for losses caused by the disclosure of Confidential Information is now expressly provided for in the Law in respect of an organisation’s executive (General Director, head of representative office, branch director, etc.). The determination of the losses caused by any wrongful action of the executive is to be made in accordance with civil law. This means that losses include not only actual damage, but also loss of profit.

In relation to the scope of liability of other employees, the new version of the Law on Commercial Secrets also uses the term ‘loss’. However, under the provisions of Art. 15 of the Civil Code and Art. 238 of the Labour Code, an employee’s obligation to compensate their employer for losses caused by the disclosure of Confidential Information is limited to direct actual damage. Loss of profit may therefore not be recovered from an employee who is not an executive.

Practical recommendations

When the Law come into force, employers will be better ‘equipped’ to protect their Confidential Information. However, employers will only enjoy the right to recover damages from current and former employees if they implement in their companies a special trade secret regime and take some additional actions in relation to employees as required under the Law on Commercial Secrets. Access to Confidential Information should be granted only to those employees who absolutely need it to perform their work duties. Access to Confidential Information may be given only upon employee’s express consent, unless employee’s right to such access is provided for in the employee’s work duties under the employment agreement.

Failure by the employer to adopt all the above measures may prevent them from successfully recovering damages for the wrongful disclosure of their Confidential Information by an employee. Employers may therefore find it worthwhile running a compliance check of their confidential business information protection systems against the requirements of the Law on Commercial Secrets.