Drafting Confidentiality Agreements: What You Need to Know
Drafting confidentiality agreements (also known as non-disclosure agreements) needs to be done properly to ensure they can be legally upheld.3 min read
Drafting confidentiality agreements (also known as non-disclosure agreements or secrecy agreements) needs to be done properly to ensure they can be legally upheld. When drafted correctly and entered into with the full understanding of the parties involved, they can be an effective tool in protecting sensitive, classified, or proprietary information. Unfortunately, however, many people sign a confidentiality agreement thinking that is simply part of the hiring process for a new job, and do not necessarily think that the other party will actually enforce it.
There are typically two parties involved, when a confidentiality agreement is involved:
- Disclosing party, which is the person or party who is disclosing the sensitive information; in many cases, this may be the employer, providing access to such information to an employee
- Receiving party, who is the person or party that is gaining access to that information, frequently the employee
At its essence, a confidentiality agreement is a legal document, or contract, that exists between two or more parties wherein the parties agree that some information should be confidential, thus prohibiting any of the involved parties in sharing that information with unauthorized parties. Confidentiality agreements can be frequently found as part of the employment contracts for people such as engineers and scientists. These people work in research and development, giving them access to trade secrets and other sensitive information.
Additionally, confidentiality agreements may be required for people who serve on the board of directors of a company or organization or for people who have access to the business’s financial data. Other examples of information that may be seen as being confidential by an employer, thus prompting a confidentiality agreement, include:
- Strategic plans
- Marketing and communications plans
- Standard operating procedures
- Client lists
Within the scope of employer/employee relationships, a confidentiality agreement can provide means for a free flow of information, while alleviating concerns that the employee will share that information with future employers or competitors, should they ever choose to leave, as they often have a time frame attached to them. For example, an employee may not be permitted to disclose confidential information for the duration of their employment, or for a period of up to five years after their employment ends. This type of stipulation is quite common within confidentiality agreements.
While the most common use of a confidentiality agreement tends to exist in the scope of an employer having an employee sign one, they are also frequently used with independent contractors, investors, and vendors.
Provisions to Consider
Whether you are drafting the confidentiality agreement yourself or have obtained the services of an attorney, there are things on which clear guidance needs to be provided, including:
- What information is secret? Does this confidentiality agreement only pertain to those products or technology that the employee may develop, or does it apply to anything that may be seen or heard, even if outside the scope of the employee’s job? For example, as a chemical engineer, you probably have nothing to do with the marketing efforts of the company, but what if you happen to see a copy of the marketing plan?
- How long must this information be kept confidential? As soon you leave the company, are you free to share everything on which you may have worked, or seen? Or, will you be expected to keep the company secrets as secrets, for a certain period of time even after moving on to another employer? (Generally, you will find that it is going to be the latter.)
- How to identify the confidential information?
- What uses of the information are permissible? For example, as an employee, you may have the issue of who owns the intellectual property rights to content, products or technology that you created. Are you going to have the right to share that information, as you see fit, or will you be bound by the confidentiality agreement to not share it? If your company is contracting with another company on a project, will you be able to share sensitive information with this other company for the purposes of completing the project?
Ultimately, while it may seem tedious, it is important to be as specific as possible on all of these points. The more specific you are, the less likely that there will be confusion down the road, and the more likely that the confidentiality agreement will be upheld, should it ever have to go before a judge.
If you need help with drafting a confidentiality agreement, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.