Labor: The incredible value of stand-alone confidentiality agreements

Confidentiality or non-disclosure “policy” cannot provide the same protection as a stand-alone agreement

If your company has information that helps it compete (and all do), don’t overlook one simple measure that can help protect that information, and all that goes with it.

One of the simplest measures for protecting a company’s intellectual capital, including information about its competitive position with critical customer and supplier relationships, is simply not used widely enough. Using a brief stand-alone confidentiality agreement, broadly across the workforce, can help set a backstop against departing employees being scot free to take their knowledge and relationships “across the street” to a competing employer.

Second, the specific, explicit protection provided by a stand-alone agreement —the power to bring a lawsuit, to conduct discovery, to pursue monetary damages, and even to seek injunctive relief, can provide leverage in negotiations dealing with competitive activity by former employees. If it can be shown that the departing employees removed any information from the first employer, by taking materials, downloading files, or e-mailing to personal e-mail addresses on the eve of departure, or by taking action in the marketplace that would only be possible with such inside information, a stand-alone agreement will provide a straightforward breach of contract claim against such activity. With the leverage provided by the agreement, the first employer may be able to demand and extract significant concessions from the new employer or dramatically restrict the activities of the departing employees.

Third, to the extent that an employer is considering a claim that former employees have taken statutorily protected “Trade Secrets,” such that additional damages or fees may be available as remedies, one of the first questions that will be raised is whether the employer exercised “precautionary measures,” “reasonable under the circumstances,” to preserve the confidentiality of its sensitive competitive information. A helpful Exhibit 1 for the first employer will be the confidentiality agreement that all of its employees are asked to sign at the onset of employment. In the absence of such an agreement, the first employer will be fighting an uphill battle to prove in fact that it does exercise precautions to protect its sensitive information, and that failure may doom any claim that it has information that rises to the level of a “Trade Secret.”

Contributing Author

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Russ Sizemore

Russ Sizemore is a member of Moore & Van Allen PLLC’s Employment & Labor practice group.  He serves as an extended member of his clients’...

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