Should Businesses Require Employees and Other Contractors to Sign Confidentiality Agreements?

Men coming to an agreement

Few people can run a business alone. Most business owners need the assistance of employees, vendors, and other independent contractors in order to run their businesses.

However, the inclusion of other people in the affairs of a business necessarily includes others in the circle of people who know certain information about the business not generally known to the public or to competitors. Certainly the disclosure of certain information to the public or competitors will be more damaging to some businesses than others, but there are few businesses that would be willing to share every aspect of the business, its finances, and its operations.

Blind Trust Isn’t Sound Business Judgment

Should a business just trust its employees, independent contractors, and other people with whom the business shares information to keep it to themselves and use their own discretion regarding when and where that information may be disclosed? Most businesses would say that tactic is dangerous to the future of the business and incredibly risky. Therefore, many businesses require other people who are to learn secret information of the business to agree to keep that information confidential.

What is Confidential Information?

Confidential information may be a trade secret. However, confidential information does not have to be a secret recipe or the design for a new type of technology. Sometimes confidential information is merely the pay structure of the business’ employment contracts or its customer information.

Secret information can be anything that is unknown to the public, the competition, or others from whom the employer wants it to remain secret.

Specifics of Confidentiality Agreements

In order to protect secret information, a confidentiality agreement will state that the person who is about to learn this information promises not to disclose it to others. The person about to learn this information may not disclose it now, or at any time in the future as long as it is still secret information.

Often times a confidentiality agreement will define confidential information, or the secret information, as relevant information that is not generally known or available to the public or known to competitors. The contract may list some of the following as confidential information: financial condition, invoices, contracts, forms, research, price lists, vendor information, marketing materials, advertising materials and developments, sales materials and reports, copyrighted materials, trade secrets, designs, manufacturing processes, client lists, client preferences, client needs, client identities, potential client identities, and any other data.

Breach of Confidentiality Agreements

A person who has entered a confidentiality agreement and breaks that agreement is liable to the other party for breach of contract. A court of law may require the party breaking the contract to pay money damages to the other party, or a court may order some other type of remedy.

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