No matter what industry you are in, there are several threats and weaknesses that a business is vulnerable to despite its strengths and opportunities. Businesses become even more vulnerable to competitors, unpredictable working relationships, and challenges when they are not optimizing the use of Confidentiality Agreements. There is a reason that business owners often find it necessary or desirable to keep valuable and sensitive information private. In some instances, a business may have developed certain key elements that help distinguish it from its competitors. In other instances, a business owner may handle sensitive information that a client would not want exposed or that is protected by law. If your business develops products using proprietary information or handles sensitive information, it is imperative that you use a confidentiality agreement to prevent employees and contractors from disclosing it. When businesses do not utilize the advantage of confidentiality agreements, it is a lot like bringing a knife to a gunfight. If you have ever heard of this famous idiom used in the English Language, you know that it means that you are inadequately prepared for the situation you are entering. We are passionate about ensuring our clients are proactive and prepared when it comes to their business, by creating confidentiality agreements that allow them to deter any potential threats and weaknesses. Let’s break down what a confidentiality agreement is, and how creating one specified to your business will allow you to be prepared for any given situation.
What is a confidentiality agreement?
A confidentiality agreement, also known as a nondisclosure agreement, is a contract that requires that a party agree not to disclose certain information made available to the party. In most instances, the information that a business wants to keep confidential is either sensitive information, personal information, or information that affords the business a competitive edge. The latter type of information is often categorized as a trade secret. Trade secrets are proprietary processes, systems, technology, vendors, and other types of information that enable a business to maintain a competitive advantage. Confidentiality agreements are often used by employers when hiring employees and independent contractors to maintain the confidential nature of the information available to the employees and contractors.
When should you introduce a confidentiality agreement?
It is usually best to enter into a confidentiality agreement at the inception of the work that will involve the exchange of sensitive or proprietary information. Failure to execute a confidentiality agreement on the front end may later result in resentment and hostility—or even expensive litigation. If a party is resistant to being bound by a confidentiality agreement, this may indicate that the working relationship could encounter challenges. In other words, a confidentiality agreement can serve as a way to measure and secure trust between the parties to an agreement.
It is also important to note that even when a confidentiality agreement is introduced at the beginning of a working relationship, it can include terms that remain enforceable beyond the conclusion of the working relationship. For example, a confidentiality agreement entered into between a business owner and an independent contractor can remain in effect after the work contract has ended.
Businesses that already have established confidentiality agreements typically introduce them to their new hires along with other HR documents on their first day of employment. An HR representative will usually give a run down of what a confidentiality agreement is and why the employee is signing it to provide clarity and peace of mind to the new hire.
What should your confidentiality agreement include?
Confidentiality agreements should be clear and detailed. Confidential information should be explicitly identified and described in the agreement, as should the names of the parties that are bound by the agreement.
However, employers and business owners should exercise care in how they define confidential information within the agreement. Categories of information that are too broad or vague in the agreement may be considered unenforceable during a lawsuit if a dispute arises. Similarly, a nondisclosure agreement may protect confidential information only for a reasonable period of time, and this period varies for different types of confidential information. Failing to take the proper steps to protect your confidential information, such as entering into a confidentiality agreement, could result in defeat if you ever must prove that someone has violated your expectation that certain information not be disclosed.
Call Koukol Johnson & Schmit
We are here to help you protect your business. Call us at (402) 934-9499 or click here to schedule a consultation with our Business and Employment Attorney Angela Schmit. We are eager to help you identify the confidential information you need to protect and develop the proper legal tools to help you achieve that goal.
