Do you own a business and want to require your employees to keep your business’s information confidential? Are you an employee who is being asked by your employer to sign a confidentiality agreement?

Purpose of Confidentiality Agreements

A confidentiality agreement is a contract. Contracts are promises. Confidentiality agreements are used in situations where someone will learn confidential information of another but that other person wants to make sure that the information is not further disclosed.

For example, an employee may hire an employee. During the course of the employee’s employment, the employee will necessarily learn some secrets of the employer.

An employer’s secrets may be trade secrets. An employer’s secrets may be secret information about the identity of clients, secret information about a recipe used by the employer, or secret information contained in documents in the employer’s possession. An employer’s secret information can be anything that is unknown to the public, the competition, or others from whom the employer wants it to remain secret. Therefore, the employer may require that the employee sign a confidentiality agreement.

Substance 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.

Breaking a Confidentiality Agreement

When a person signs a confidentiality agreement the person is promising to abide by the terms of that agreement. Failure to abide by the terms of that agreement results in a breach of the contract.

When a person breaches a confidentiality agreement, the other person is entitled to monetary or other relief. Often times a confidentiality agreement will have a paragraph explaining the remedies for breach of the agreement. By signing the confidentiality agreement the parties are agreeing to those remedies in the event of a breach of the agreement.