Posted by Doc Worley on June 13, 2014 at 8:40 AM
If you do not want your employees to reveal vital, important and confidential information, then tell them so in writing. This is very important to protect your company's interests, across the board, especially in areas where trade secrets and other business "never tells" can be compromised. Who do you know in business that intends to grow a compromised one? Therefore, take action and require your employees to "ok" your request in writing...but how?
David has written a great article that addresses that question, We agree and are sharing it with you. For more information, contact us...ASAP! WE HEAR YOU ,,,AND WE ARE HERE!
Keep the Cat in the Bag
Employee Confidentiality Agreement - How It Works
By David Waring
An employee confidentiality agreement is similar to a non-disclosure agreement.
The difference is that a confidentiality agreement is with employees
and contractors, where a non-disclosure agreement is with other firms.
An Employee Confidentiality Agreement Can Help Retain Secret Information:
- First, the simple act of signing the
agreement may impress upon the person the importance of confidentiality
and prevent him or her from revealing the business’s information.
- Second, there are state laws that
protect trade secrets, but to take advantage of these laws the business
must be able to show that it attempted to keep their information secret.
- Finally, a confidentiality agreement
provides a basis to sue a current or former employee if he or she
discloses or utilizes information in violation of an agreement. A
confidentiality policy will demonstrate, in court, that something was
meant to be kept confidential.
An employee confidentiality agreement should include broad language
that requires employees and other individuals to protect non-public
information about the company, its customers, and its employees. It
should also instruct them not to use this non-public information or
disclose this information with others, except as required by their
current position with the company.
However, just because information is not explicitly shared that does
prevent the information from being used by former employees when making
decisions in new positions with other firms. This is why a business may
also consider having employees sign a non-compete agreement in addition
to a confidentiality agreement.
In order for trade secrets to be protected under an employee
confidentiality agreement, you have to be able to provide proof that
they are both proprietary and non-public. This means that the
information is not known to the world at large but only to a small,
select group of people within the company. Also, it should be labeled
or otherwise communicated that the information is confidential. For an
employee confidentiality agreement to prove effective, it should provide
for the following:
- Confidentiality – A
confidentiality provision would prohibit an employee or someone
associated with the business from using or disclosing any trade secrets
he or she may have had access to in the course of employment or
interaction with the business. In short, the person agrees, on pain of
legal sanctions, to ensure the confidentiality of the business secrets
entrusted to him or her.
- Restriction – This
clause is generally used only in employee confidentiality agreements.
However, some businesses use this clause in all their confidentiality
agreements. This provision ensures that the person will not compete with
the business after leaving the job or once the interaction with the
business is over. For example, the agreement might require that the
employee not start his or her own company or take a job with a
competitor for a specified period after leaving the job.
- Assignment – Since the
person may develop valuable data in the course of employment or
interaction with the business, this provision ensures that the data
belongs to the business. In short, it addresses the question of who owns
the resulting trade secret.
- Severability – Because
one or more provisions of a confidentiality agreement could run afoul of
the law, it’s a good idea to include a severability clause. This clause
would uphold the remaining provisions in the agreement if a court
should strike down one or more provisions as illegal or contrary to
- Acknowledgement – To
keep the person from later pleading ignorance and challenging the
agreement, the agreement should include a clause that stipulates that
the person understands and voluntarily consents to the agreement’s
Make sure the employee confidentiality agreement complies with the
personnel manual. For an employee confidentiality agreement to be most
effective, the personnel manual should delineate company policy on
proprietary information. The business must define what constitutes a
secret if the agreement is to work. This definition can be accomplished
by taking the following steps:
- Labeling proprietary information as “secret and confidential”.
- Limiting access to the information to employees with a “need to know” basis.
- Periodically searching employee lockers, desks, and PC files for unauthorized storage of information.
- Placing notices about the company’s policy at all photocopying machines, computers, and facsimile machines.
- Limiting access to sensitive, corporate information by unauthorized persons.
- Requiring outside consultants and
temporary employees, who have access to sensitive proprietary data, to
sign confidentiality agreements.
- Including an acknowledgement in
termination notices that reminds employees of their continued obligation
to not misuse corporate trade secrets.