Question 127: Proving the material damage of an enterprise when Employees disclose confidential information on the social network (such as property, prestige, revenue/profits, costs, etc.) to apply the appropriate form of discipline is often very difficult because a damage may be of a mental nature such as reputation and brand of the enterprise and you cannot quantify the extent of such damage in terms of monetary value or prove the existence of such damage. What should the enterprise do in these cases?

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1.Are Employers required to prove any material damage when Employees disclose the enterprise’s confidential information on the social network?

First, it should be made clear that the term “confidential information” is not currently covered or explained in the Labor Code and its written guidelines on implementation. Article 126.1 of the Labor Code only refers to the term “business secret, technological secret”, which is defined as one of the cases where Employers have the right to impose the disciplinary form of dismissal on Employees who “disclose their business secrets and technological secrets.” Therefore, in order to avoid risks to Employers with regard to explaining the term “confidential information” as well as providing Employers with a reasonable legal basis to discipline Employees for their disclosure of confidential information, Employers should first define the concept of confidential information as part of business secrets or technology secrets. In such a case, if Employees disclose confidential information (which is considered part of any business secret or technological secret), the enterprise will have the grounds to apply the disciplinary form of dismissal against Employees.

The legal question is whether in case of Employees’ disclosure of their business secrets and technology secrets, Employers are required to prove that their enterprise has suffered material damage to provide a basis for imposing a particular form of discipline on Employees. The answer is no. Article 126.1 of the Labor Code regulating the violation of “business and technological secret disclosure” actually only covers offenses by Employees without providing the condition that Employers must suffer physical damage from these violations. This means that Employers have no obligation to prove that any material damage they have suffer results from Employees’ violations. Determining any actual damage, if any, aims to define Employees’ material liability to Employers.

Therefore, Employers, when elaborating ILRs, should not be self-binding upon additional obligations that the company must prove its material damage due to the breaching disclosure of “business secrets and technology secrets” by Employees. In other words, Employers merely stipulates the Employee’s obligation to maintain the “business secret and technological secret” of the enterprise in the ILRs. Then, if Employers have sufficient grounds to prove the said violation by Employees, Employers may impose labour discipline on Employees in accordance with the labour law without needing to prove that the enterprises suffers actual damages from Employees’ violation.

2. Where Employers have stipulated in the ILRs that the condition for Employees to suffer disciplinary action is that the violation must lead to corporate damage, how do Employers deal with the problem, especially while determining any damage related to the reputation and prestige of the enterprise, it is difficult to quantify the damage extent in terms of monetary value or even impossible to prove any arising damage?

As discussed above, in principle, Employers are not obliged to prove that the enterprise has suffered actual damage caused by the violation of the ILRs upon taking disciplinary action against Employees. The matter of proving the actual damage suffered by the enterprise, if any, is only raised if Employers want Employees to be liable for material damage, i.e. compensating for any corporate damage caused by the violation.

However, if the ILRs of an enterprise stipulate that the condition for Employees to suffer disciplinary action is that the violation must lead to corporate damage, Employers are obliged to prove the actual damage in accordance with the ILRs before issuing a decision to discipline Employees. According to the general principle of the Civil Code 2015, actual damages are determined to include physical damage and mental damage. From experience, proving actual damage of both said types, especially mental damage is not easy at all, due to lack of clear criteria for determining the mental damage of an individual or organisation. If falling into this case, Employers almost come to a deadlock and it is difficult to discipline Employees, even if Employers can demonstrate that Employees violate the internal labour regulations (but cannot prove the actual damage of their enterprise). Therefore, if Employers want to discipline Employees upon their “disclosure of business secrets and technology secrets” of the enterprise on the social network, the best solution is that Employers should not be “self-binding upon their obligation to prove any actual damage” to their enterprise due to this violation since the time of formulating the ILRs.