Employee Confidentiality Agreement

Remember how excited you were when you scored your first major job at a large corporation? The thrill of the job offer, the beauty of the corporate campus, the buzz of new strategies and opportunities filling your mind day and night. Think hard, and you probably also remember being asked to sign an employee confidentiality agreement. Think even harder, and try to remember what provisions were actually in that agreement. You probably can't. You were most likely so enticed by the opening that the contract could have called on you to sign over your first born child and you would have asked for a pen. But as you move along in your career, or even have the good fortune to successfully start up your own company, you would benefit from understanding the key issues raised by this kind of a contract. What kinds of issues pop up over and over again? Typically, you'll see a focus on the confidentiality requirement, the non-compete provision, the non-solicitation provision and the intellectual property rights in the work developed by the employee.

Confidentiality. This clause restricts the employee from sharing any of the company's confidential information with any third parties other than the company's authorized agents and subcontractors. Usually the employee must also make sure that these agents and subcontractors have signed a confidentiality contract protecting the company, and that they only receive company confidential information on a "need to know" basis. The employee might also be responsible for marking or stamping company confidential information with a proprietary notice before handing it over so there can be no argument later as to whether or not the information should have been kept secret. Another key concern that comes up in confidentiality clauses is whether or not the employee is bringing a previous employer's confidential information with her in order to perform her new job responsibilities. A good employee confidentiality agreement requires the employee to disclose any of this information and ensure that the previous employer provides clearance or that there is another legal reason why it's acceptable to use the information for the new employer's benefit.

Non-Compete. A non-compete provision generally restricts an employee from unfairly competing with the employee's old employer. So, if you hire an employee, and ask her to sign an employee confidentiality agreement containing a non-compete provision, you might specify that the new employee must agree that if she ever leaves your company, then she won't compete within a particular field for a certain length of time. Some states frown on these kinds of constraints, such that the more restrictive the non-compete provision, the more likely it is that a judge will throw it out completely. As a result, the employer is best off if it tailors the definition of the competitive field narrowly and limits the time frame to less than a year, but you'll need legal advice in your particular state to optimize this restriction.

Non-Solicitation. A non-solicitation provision generally restricts a person from unfairly soliciting your company's employees to take a new job with a different company. You might be afraid that once someone you hired leaves your company, they might try and poach all of your most talented remaining employees. To protect against this kind of situation, you can insert a non-solicitation requirement which will ban the ex-employee from stealing your best people. However, you again probably need to restrict this to a reasonable time period, usually a year or less, and include an exception for people hired without the knowledge of the ex-employee by her colleagues after applying in response to a general advertisement.

Work/Developments. Usually an employer wants to mandate that everything created by the employee within the scope of her employment is owned by the company, including all intellectual property rights, such as copyrights, trade secrets and patents. An employer can get into trouble, though, if it fails to scrupulously check out any work brought by the employee which she created on her own or during her previous job at another company. The employer should insist that the employee reveal all of this work in the employee confidentiality agreement, and then help secure a license or clearance from the previous employer. If the work was created by the employee, then the new employer should require the employee to either assign all intellectual property rights in the work to the employer, or provide a permanent license with commercial terms that make sense for the company's business.

In the end, if you consistently nail down these key confidentiality, non-compete, non-solicitation and intellectual property development issues, your company will most likely be ahead of the competition in properly managing excellent employee confidentiality agreement arrangements.