Starting a business, whether big or small, is not an easy endeavor that just anyone can undertake. It requires a level of risk appetite that not everyone can stomach. Therefore, any business-minded individual must be decisive and willing to take risks, as a moment of indecisiveness can result in the loss of potential revenue and hinder overall business growth. One of the risks a business-minded individual must take is building a skilled and highly competent team of employees whom he can call his own. This team can help drive the business toward growth, but the business owner must first take the initiative and entrust them with the inner workings of the company. These include trade secrets, marketing strategies, customer relations techniques, and other business practices that contribute to the company’s success and growth.

However, what happens when an employee discloses vital trade secrets and business strategies to competitors? Such act can negatively affect the company’s market position, financial stability, and long-term viability. To prevent this, business owners protect their confidential information by requiring employees to sign a Non-Disclosure Agreement or Confidentiality Agreement. The unauthorized disclosure of protected information leads to a violation of such agreements and may result in civil, criminal, and employment-related consequences for the offending employee.

Similarly, in the case of Century Properties, Inc. v. Babiano (G.R. No. 220978), Respondent Babiano served as the Vice President for Sales at Century Properties, Inc. (CPI) under an employment contract containing a “Confidentiality of Documents and Non-Compete Clause”. This provision prohibited him from disclosing confidential business information or working for any direct competitor while employed and for one year following his departure, with the explicit penalty that any breach would result in the forfeiture of all forms of compensation, including earned commissions and incentives. In February 2009, CPI issued Babiano a “Notice to Explain” after receiving reports that he was providing a competitor with CPI’s marketing strategies, spreading false information about the company, and recruiting CPI personnel for a rival firm. Although Babiano resigned on February 25, 2009, he admitted in his letter that he had already sought and accepted a vice presidency at First Global BYO Development Corporation, a direct competitor, while still employed by CPI. Consequently, CPI served him a Notice of Termination for violating the confidentiality and non-compete clause and withheld his unpaid commissions. This led Babiano and Emma B. Concepcion, a Project Director who also resigned and whose employee status was disputed by CPI, to file a complaint for the non-payment of their respective commissions.

The Supreme Court partially granted the petition, ruling that Babiano’s unpaid commissions were validly forfeited because he breached the “Confidentiality of Documents and Non-Compete Clause” by accepting a position with a direct competitor while still employed by CPI. The Court clarified that the clause was clear and unambiguous, applying both during and after employment, and served to protect CPI’s trade secrets in a highly competitive environment. Conversely, the Court affirmed that Concepcion was an employee of CPI, rather than a mere agent, and ordered CPI to pay him ₱591,953.05 in unpaid commissions.

In conclusion, Non-Disclosure Agreements and Confidentiality Agreements play a vital role in protecting a company’s trade secrets and business strategies. For employers, it is recommended that such agreements be drafted in clear, reasonable, and unambiguous terms, ensuring that employees fully understand their obligations and the consequences of any violation. On the other hand, employees should carefully read and understand the provisions of these agreements before signing them and remain mindful of their duty to protect confidential information throughout their employment and, even after its termination. By maintaining mutual awareness and compliance, both employers and employees can develop a relationship built on trust, accountability, and respect for legitimate business interests while safeguarding their respective rights under the law.

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