Greetings! After promising to wrap up the mini-series on mandatory employment arbitration, a colleague shared some of his thoughts with me on the issue of cost. He was also kind enough to provide me with a link to a post he wrote on his own blog. I would be remiss if I did not share this information with you, and so, here it is. The author, Jon, Hyman, a management-side employment attorney, writes The Ohio Employer Blog, where he writes daily on employment cases and issues both in Ohio and nationwide. You can access Jon’s blog here. You can also follow Jon on Twitter here, or connect with him on LinkedIn here. Thank you, Jon!
OK now, let’s now move on to our next topic, confidentiality clauses or agreements! You may recall that The Emplawyerologist’s inaugural post recommended including confidentiality provisions in an employment contract. A confidentiality clause/ agreement is a clause or agreement that obligates the employee to hold certain information confidential, or to refrain from disclosing it to the public without the employer’s permission. Such clauses or agreements are also commonly referred to as non-disclosure agreements. Confidentiality provisions will also overlap somewhat with restrictive covenants, non-competition, non-solicitation and works-made-for-hire clauses and agreements. The Emplawyerologist will cover those in upcoming posts.
Now, I am well aware that employers are business people, and business people would generally prefer either to have fewer contracts or shorter ones. The question I often get is, “Do I really need this?” The follow-up question I get is “Why do I need this?” Why should employers include confidentiality clauses in their employment agreements (or even have separate confidentiality agreements)? Here are some reasons:
- If you have information that gives your business a competitive edge, it provides some assurances that your employee will not divulge it to competitors or use it themselves.
- Similarly, there may be information that you are required by law to safeguard. Confidentiality agreements or clauses may be one of several necessary steps to ensure that you are meeting your legal obligations. Think of these provisions as wearing a pair of suspenders in addition to a belt to be extra sure that the company “pants” stay up. For those of you who are TV buffs, think of confidentiality provisions as Maxwell Smart demanding to activate the Cone of Silence (except we expect the confidentiality provisions to actually work!) .
- By signing the agreement, the employee is acknowledging that use of certain information is a breach of his or her employment contract, which can have serious consequences.
- Without written confidentiality clauses or agreements, employers can be at the mercy of judges’ or juries’ subjective interpretations or common law rules. In particular, not all courts will assume a confidential relationship exists between an employer and, “low-level” employees. Employers who have written agreements ahead of time, defining what information is confidential and the employees’ specific obligations regarding that information are more likely to succeed with a breach of confidentiality claim.
Now that we know in generalities what a confidentiality agreement is and why employers should have them, what actual language should they contain? First and foremost, confidentiality agreements must define what is and is not confidential information, so that employees (and if necessary, judges and/or juries) know what information you, as the employer are (and are not) seeking to protect. So, how do we define “confidential information”? The answer will differ somewhat for each business. In general, however, one of the following four types of definitions will be found in an employee confidentiality agreement:
- General Description: General descriptions will usually read as follows: “I agree not to use or disclose any trade secrets or confidential or proprietary information of ABC Company”. The advantages to this type of description are that they are easy to write and may give the broadest coverage, because almost anything that could fall within that description is potentially covered. They may also solve the problem of including future or unanticipated items. On the down-side however, it is so vague that it really does not define “confidential information”, which can result in disputes as to exactly what is covered by the agreement. As such, a general description could defeat the very purpose of confidentiality clauses.
- Specific DescriptionThis type of description will specifically spell out either in the body of the agreement or in an exhibit attached to the agreement what information will be defined as “confidential”. Typically, a specific description will include (without limitation) customer lists, pricing information, trade secrets, formulae, patented information and the like. Employers who are able to specifically identify the information and are sure that disclosures to employees will be limited to that information, should say so. This type of description is more commonly used by companies with sophisticated technology protection programs. If however, the information is more general, it may be more difficult to specifically define it. Specific descriptions may also be less effective, or even ineffective in relation to information not presently contemplated or in existence.
- Marked Items: Confidentiality agreements can limit nondisclosure to items marked “confidential”. This approach eliminates doubts about what is covered, but it does not protect information not reflected in written documents, and employees may forget to mark materials “confidential”. For those items that are so marked, however, there is a strong likelihood of enforceability.
- Middle Ground: This approach attempts to blend all the advantages of the other three. Typically, a definition using this approach will read as follows: “As used in this Agreement, ‘Confidential Information’ means a) information identified in Exhibit A of this Agreement, attached hereto; b) information marked by the Company as confidential, c) information treated by the Company as confidential.” This approach achieves broad protection and addresses the employer’s failure to mark information as confidential as long is the employer actually takes additional reasonable steps to protect the information.
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Disclaimer: The content of this post and of all posts on The Emplawyerologist is not legal advice and does not create an attorney-client relationship. Always consult with competent local employment counsel on any employment law issue.