By Winmark Business Solutions
Whether you need a confidentiality policy will depend upon what type of information you feel you need to protect. Some specific items that can be protected by a confidentiality clause or agreement are customer lists, trade secrets, inventions, discoveries, data, formulas, business methods, processes, machines, manufacturers and compositions.
Definitions of confidential information. If you decide to have a confidentiality policy, you need to specify exactly what you’re protecting and what you consider confidential in order to prevent current or former employees from later claiming that they did not realize that the information they were using, sharing, etc., was protected. Here is an example of a clause specifying what is considered confidential for purposes of nondisclosure.
Example: The term “Confidential Information” means information, not generally known, previously acquired by ABC Company and/or which may be acquired by the employee and/or ABC Company during the period of the employee’s employment by ABC Company, relating to products (whether existing or under development), the business activities of ABC Company, technology or its inventions.
Consideration clauses. “Consideration” is a legal term that refers to the “thing of value” that passes between parties to a contract. In the case of an applicant, getting the job might be considered adequate consideration. If the employee has been working on a project, and you decide that the employee’s research or work is confidential, consideration might be continuation of employment or a bonus of some kind.
For the agreement to be binding, the bonus or other consideration must be enough to reasonably compensate the employee for what he or she is giving up by signing the agreement. A $100 bonus, for example, may not be enough.
The examples below demonstrate how to build the consideration for the employee into the agreement or policy.
- Example: In consideration of my employment by the Corporation and of the further continuation of such employment, and of the salary or wages paid to me in connection with such employment and for other good and valuable consideration, I agree as follows:
- Example: In consideration of the above nondisclosure and noncompete agreement and in an effort to avoid possible conflicts and unethical actions, ABC Company, Inc., employees are required to read and confirm that they are familiar with these policies and that they have no knowledge of any violations of these policies.
Remedies and damages statements. If you’re concerned enough about confidentiality in your business to have a policy, you’ll want to give that policy some teeth. Make it clear to employees what the repercussions are for violating your confidentiality policy.
Remember — noncompete agreements, whether as a part of a policy or as a separate document, are difficult to enforce. Before asking employees to sign or before trying to enforce such an agreement, consult an attorney.
The example below may help you devise a set of remedies or damages that you will want to collect if you have to enforce your policy.
Example: The employee agrees to pay liquidated damages in the amount of $___________ for any proven or admitted violation of the covenant not to compete contained in this agreement/policy.
Noncompete statements. Some employers choose to make noncompete clauses part of their confidentiality policy that employees are asked to sign. Alternately, employees may be asked to sign noncompete agreements that are discreet, separate documents.
About the Author
Winmark Business Solutions (WBS) is a free Web site for small businesses and entrepreneurs containing over 6,000 pages of business-critical information and downloadable tools at www.WBSonline.com. WBS is a division of Winmark Corporation, a multi-brand franchisor with nearly 900 franchise locations in North America. With over 25 years working with small businesses, WBS draws upon years of experience to bring important small business articles, information, tools, forms, checklists, calculators and downloadable forms to the small business owner to help their business grow. WBS contains over 6000 pages of business-critical information all available at www.WBSonline.com.