Confidentiality

Bulgarian employment legislation specifically provides for an obligation of all employees not to disclose information regarding the employing person that is of confidential nature.  Thus, even if not specifically provided for in the individual labour agreement, confidentiality in the framework of an employment relationship is assured through general statutory obligations.  Failure to observe confidentiality represents a violation of the working discipline, which might be subject to a disciplinary sanction.  Thus, throughout the existence of the labour relationship the respective individual is obliged to observe confidentiality. 

With respect to the post-employment obligations to observe confidentiality either a contract or the special provisions of the Law on Protection of Competition (“LPC”) might apply. The LPC prohibits the knowledge, use, or disclosure of industrial or trade secret in contradiction with the fair dealing practices, as well as the use and disclosure of industrial or trade secret which has become known or has been disclosed under the condition that such information will not be used or further disclosed. 

“Industrial or trade secret” is defined as facts, information, resolutions and data related to business activity, which confidentiality is in the interest of its rightful owner, where the latter has taken the appropriate measures to preserve the confidentiality.

The Commission on Protection of Competition (the “CPC”) has often identified violations of the above prohibition in cases where ex-employees or shareholders of a company have moved to another company or established a new one with the same or similar scope of business activities. Making use of the information in their possession, which represents industrial or trade secret, they are in a position to take an advantage for the new company in contradiction with the fair dealing principles. In such cases together with the company, which has unfairly used or disclosed such industrial or trade secret, the individuals (employees, shareholders, managers), who have contributed to the violation shall be also liable. 

The practice of the CPC indicates that the existence of general confidentiality clauses or clauses for protection of trade secret in the employment or management agreements do not meet the requirements for undertaking of special measures by the company for protection of its industrial or trade secret. The protection shall be only granted by way of approval of special acts, determining in detail the information and data considered by the company as industrial or trade secret, where such special acts have been duly communicated to the individuals, responsible to deal with such information.

Non-compete

The Bulgarian law favours the principle of freedom of contract, and the parties to an agreement are entitled to regulate their relationship in such a way, as to determine the scope of their cooperation. Nevertheless, the freedom to negotiate is not entirely unrestricted, and on public policy grounds the legislator has reserved for itself the right to interfere in private legal relationships (and on the market as a whole).

In respect to non-compete covenants, it has been confirmed by a constant line of court and administrative practice that the constitutionally proclaimed freedom of labour pre-empts any attempt to restrict, by means of a contractual stipulation, the ability of an individual to engage in employment activities. It has been noted that “declarations and/or clauses in an employment agreement, whereunder an employee undertakes not to engage in an activity, competing with the business of the employer on the Bulgarian market, are devoid of legal effect, as they come into variance with the idea for liberal and efficient development of the Bulgarian market by stimulating competition, and therefore such undertakings contradict with the good morals and are invalid“.

Irrespective of the above general conclusion, it should be noted however, that non-compete covenants (including post-contractual ones) are not null and void per se in every enforcement aspect. While it is broadly accepted by the court practice that specific performance cannot be awarded for a breach of a non-compete obligation, the question is still open whether compensation for damages is possible.

The European doctrine and practice have imposed different tests to the enforceability of non-compete covenants, several of which being common to most of the jurisdictions. In the lack of well-established practice in Bulgaria, it could be the case that in judging on the admissibility of such restrictions, the competent Bulgarian authorities apply similar criteria.

First and foremost, it seems that the courts would uphold a particular non-compete undertaking as long as it has been made in consideration for specific promise on the part of the employer - i.e., where the employee has received a consideration in return. On another point, even if consideration is present, the non-compete covenant would only be considered enforceable if appropriate in terms of duration and coverage - i.e., if it does not unreasonably restrict the rights of the former employee to find a suitable alternative employment. A restriction would be appropriate as long as it is limited to the minimum necessary to protect the ex-employer’s business - this would mean that such an undertaking covers the same market segment (both in terms of products/services and in terms of geographical scope) as the one on which the ex-employer is active. Moreover, the appropriateness of the restriction should be further scrutinized considering the particular functions inherent to the employee and his access to confidential information and awareness of the business policies of the employer.

Non-compete obligations of registered managers during the term of office are assured at statute level. All elected members of management or supervisory bodies in commercial companies are supposed to sign non-compete affidavits, where the scope of said affidavits is outlined by the Law on Commerce.