Confidentiality agreements: keeping business secrets in-house.

• Author: Waller, Jeff
• Position: Legal Speak

How does your company protect important information that gives your business a competitive edge, and is at risk of walking out the door with a departing employee? How do you prevent current employees from sharing the information with individuals working for your business rival? Regardless of the state of the economy, businesses want to protect their competitive edge. However, a business cannot prohibit every departing employee from working for the competition. How can you minimize these risks?

For example, your company implemented a strategy to lower operational cost for handling walk-in customers, the system provides a competitive edge, your business rivals are not using a similar process, and a salesperson trained in the system is leaving your company. Does your company have to stand by and watch a knowledgeable employee go to work for the competition and then hope that the ex-employee does not share any information about the system or its benefit?

THE DOTTED LINE

Many businesses are addressing this issue by requiring all employees sign a confidentiality agreement. The agreement does not prevent a departing or ex-employee from working for a business rival or from going into competition with your business, like a non-compete agreement. And unlike a non-compete agreement, a confidentiality agreement is not limited mainly to upper-level employees or employees with the financial capability to enter into direct competition with your business. Instead, confidentiality agreements can apply to all employees.

The purpose of a confidentiality agreement is to prevent a current or departing employee from disclosing business secrets without permission from the business. Normally, the agreement does not actually describe a particular process or secret. Rather, the agreement describes the types of information, systems, or processes covered by the agreement.

Beyond trade secrets, the agreement can apply to any information providing a business with a competitive edge, including business practices, operation policies and procedures, computer processes, research and development strategies or matrixes, research projects, services, vendors or suppliers used, pricing strategies, customer lists, customer prospects, production sourcing, marketing and selling, financial information, personnel information, and even the terms and contents of employee agreements.

SECRETS KEPT

Basically, the agreement is drafted...