A Step-By-Step Guide to Writing an Employee Confidentiality Agreement
Sharing confidential information with the personnel is part of the employer-employee relationship. How can you prevent your business secrets from leaking out then? Easily! Ask your employees to sign an employee confidentiality agreement.
If writing contracts is not your expertise, this article will explain all the ins and outs of drafting a perfect employee confidentiality agreement.
Understanding an Employee Confidentiality Agreement
The contract goes into effect when the employee signs it and lasts during the employment and some time after the relationship ends, usually one to three years.
While the confidentiality agreement prevents employees from leaking trade secrets, it can’t prevent them from revealing illegal and unethical affairs.
Employee non-disclosure agreements usually protect:
- Innovative ideas
- Financial records
- Intellectual property
- Prospective customers lists
- Actual customers lists
- Marketing plans and business strategies
- Products, both existing and in development
- Client and customer data, like identity and transaction history
- Client’s products and intellectual property created while working with you
Types of Confidentiality Agreements
Depending on who signs them, there are different types of confidentiality agreements other than the employee-employer ones. You can find a brief overview in the table below:
Type of Confidentiality Agreement
|It’s a confidentiality agreement between two parties sharing sensitive information. Parties that sign this type of contract are usually investors, contractors, and businesses|
|Applicants for management and senior-level job positions are often required to sign a confidentiality agreement before the interview starts|
|People working in the healthcare industry must sign a confidentiality agreement to protect the sensitive medical information of patients|
|Every business should have a financial information confidentiality agreement to prevent the disclosure of financial information, such as bank statements, credit card information, payment transactions, and other finance-related business documents|
|The purpose of a patent confidentiality agreement is to keep the patent or invention safe from anyone trying to claim the idea as theirs|
|The agreement should prevent the disclosure of any product-related information|
|Actors, producers, and directors sign a movie non-disclosure agreement to keep the script safe from the public|
Intern and Volunteer
|People that volunteer or work as interns in a company can get in contact with sensitive information, so they need to sign a confidentiality agreement|
A confidentiality agreement can be:
- Mutual—If both parties reveal sensitive and confidential information
- Unilateral—When one party discloses classified information to another
Employee confidentiality agreements are unilateral most of the time.
What Should an Employee Non-Disclosure Agreement Include?
Keep in mind that an employment agreement covers other aspects of the employer-employee relationship, so the confidentiality agreement doesn’t have to be too extensive. Here’s what an employee non-disclosure agreement should include:
- Signing parties—Contact information of the employee and the company
- Considerations—The agreement should affect both parties to be considered valid and enforceable, so it must state how it protects the employee as well as the employer
- Protected information—This is the most important clause of the agreement. It should list every document and piece of information that the contract should protect from disclosure
- Ongoing obligations—This provision should specify that the employee is obligated to maintain confidentiality even if they leave the company. It should also state the exact duration of the agreement
- Exceptions—It should include all potential scenarios in which the employee would be allowed to disclose protected information
- Return of property—The agreement should include a detailed list of the property that the employee must return after they leave the company, including files, notes, records, and work products
- Remedies—This clause should define what happens if the employee violates the contract
- Governing law—This section specifies the law that will govern all the potential disputes and legal pursuits
What Are the Consequences of Violating an Employee Confidentiality Agreement?
A breach of an employee confidentiality agreement can have serious ramifications, such as:
- Criminal charges
- Monetary damages
- Termination of employment
- Loss of business clients and relationships
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