When would it be wise for my business to utilize confidentiality agreements?

By | May 13, 2008

Along the same lines as covenants not to compete are confidentiality agreements. Many times an employee or partner will leave a business and the need for a complete “no competition” agreement is not necessary. A simple confidentiality agreement may be entirely suitable when attempting to protect a company’s secret food recipe, cooking technique, perfume formula, varnishing mixture, anything that only employees of the business would be privy to.

Employees or former partners, even former owners, would sign this agreement stating that they would not disclose confidential procedures or formulas to the competition, or use them to start their own business venture. The agreement should also state a set period of time it would remain in effect, but unlike a covenant not to compete, these types of agreements can extend for a much longer period, usually decades instead of a few months or years. Confidentiality agreements can also prohibit a former employee, partner or owner from making negative comments and statements about the business after they have left, thereby causing negative, and sometimes unfounded, publicity. If a settlement or severance agreement is generally utilized when someone leaves the company, the confidentiality agreement can easily be added to extend extra protection for the business owner. However, if there has been some type of illegal, discriminatory or harassment activities, or legal charges at the business, no agreement to keep this behavior confidential would be honored by a court of law.

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