7 Essentials of a Confidentiality Agreement

7 Essentials of a Confidentiality Agreement

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To carry out your business’ operation you need employees whom you can trust. Sharing information about your business without your authorization can damage your company, perhaps through exposing trade secrets to a competitor or sharing new product strategy.

Trust goes only so far — many businesses require that their employees sign nondisclosure agreements, also known as confidentiality agreements — to keep secret information covered. That information can include just about anything such as a proprietary design, financial information, and business strategy. If an agreement is violated, you can take the employee to court and seek damages. Here’s what your confidentiality agreement should contain:

1. Party Names — Confidentiality agreements are specific, naming the parties that are participating. If you require more than one employee to sign a nondisclosure, then you must make agreements specifically for each one. Your company is one party, the employee is the other party.

2. Confidential Information — The type of information to be kept confidential must be specified. For example, if a design for a new product is shared amongst your team, that information can be kept confidential. The agreement can cover all drawings, blueprints, data, and reports, with each form marked “confidential.” That confidentiality can be extended to oral discussions of the same.

3. Exceptions or Exclusions — Not every matter is confidential and some exclusions or exceptions may apply. This may include information that is already known publicly and information that was disclosed by a third party with the knowledge of the company.

4. Obligations — The individual that is privy to confidential information may be required to return all notes, forms, records, and related details to the company if requested to do so in writing.

5. Confidentiality Date — Companies can specify a date detailing when the confidential information no longer must be kept secret. They can also simply release the person from confidence through a letter notifying them of the same.

6. Beyond the Original Parties — Certain information must stay confidential, even as a company merges, is taken over, or a division of the same is sold off. Nondisclosure agreements can keep that confidentiality in place, through successors and assignees.

7. Governance — Every legal agreement is governed by and construed in accordance with the laws of a particular state. That state must be named. Enforceability is important especially if an agreement is challenged in court. Including a savings clause (severability) with the contract can keep it active even if a judge strikes down one part.

Full Disclosure

Employees required to sign a confidentiality agreement should understand those terms. You may want to have your own attorney review it too, to ensure that your rights are preserved and that the nondisclosure agreement doesn’t hamstring you in other ways.

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