Confidentiality agreement prohibit employees from disclosing or using their employer’s confidential information except in the course of their employment. Employers should require all of their employees to sign confidentiality agreements as a condition of employment.
Employees typically acquire confidential information about the company such as the identities of customers, discounts provided, and customer preferences; the company’s financial records, profits and losses, and financial difficulties; pricing decisions, salaries, manufacturing processes, research and development, and business plans such as potential mergers and acquisitions or key hires. Employees may also acquire confidential information belonging to the employers’ clients or customers. Even the receptionist sees the arrival of a potential important client, or the angry departure of a vital partner.
A well drafted confidentiality agreement will protect both the employers’ confidential information as well as the confidential information of the employers’ clients or customers from disclosure, misappropriation and improper use.
Often confidentiality provisions are included in longer documents containing other restrictions, such as prohibitions against competition or soliciting clients and employees. However, agreements containing confidentiality provisions alone can be key protections for companies that all employees should sign.