Common Clause

How do Confidentiality Clauses affect you?

May 23, 2023

It’s very common to find a requirement for the employee’s duty to protect Confidential Information in employment agreements. It can take the form of a clause within the employment agreement, a section in a CIIAA/PIIA (touched upon in our What should I look out for in my CIIAA post), or a standalone Non-Disclosure Agreement (NDA). Today, we dive into what it is, what it isn’t, what employee responsibilities are, and how to negotiate them.

What is Confidential Information?

Confidential Information is defined as any information related to a company which cannot be obtained outside of that company. Here, ‘information’ is broadly defined to be in any format: documents, conversations, electronic data, trade secrets, personnel, and more. It’s not an overstatement to say that literally everything you encounter while on the job may fall into this scope.

What are some limitations to Confidential Information?

Despite the broad scope of Confidential Information, there are also well-established limitations:

  1. The agreement cannot limit legally protected speech, such as whistleblowing illegal activities, speaking up about discrimination, and the recent Speak Out Act, passed by Congress in December 2022, which protects the employee’s right to disclose sexual misconduct. The Civil Rights Department of California does a great job of going into detail on this topic for California employers.

  2. The agreement cannot cover information that the employee knew prior to the time of signing.

  3. The agreement ceases to cover any information made public by someone else.

  4. The agreement must cover a legitimate business purpose.

Your responsibilities towards Confidential Information

Your first and primary responsibility is to not disclose and make public Confidential Information. However, there are also follow-up implications that you should be aware of:

  1. Return Policy: Confidential information it not just something you protect, it is something retained by the company. In other words, any notes and documents must be returned and/or destroyed at the end of your employment.

  2. Informing your Future Employer: As your responsibilities typically last beyond your employment, your previous employer has the right to inform your future employer.

  3. Cases of a Breach: If you are found to have breached the agreement, particularly in the case of disclosing trade secrets, your company will likely take legal measures to file an injunction (which stops you from further action) and sue you for compensation of damages.

Are Confidentiality Clauses negotiable?

Confidentiality clauses are comprehensive and don’t have much room for negotiation because employers are keen to protect anything that could amount to being a trade secret. The most important point is to ensure that the scope does not include the limitations we discussed earlier. For example, non-disparagement clauses preventing you from speaking negatively about your employer are increasingly becoming unenforceable (the National Labor Relations Board ruled against them in severance agreements this February). For employment agreements, confidentiality clauses are always active during employment, and often carry on as long as indefinitely after your departure. Most employers will not negotiate the duration, but the shorter, the better.

When we think about confidential information and the trade secrets it may consist of, we often think about secret recipes like the Coke recipe and proprietary algorithms like Google Search. Companies will definitely go through great lengths to ensure their protection, but also included are your emails, org charts, and notebook brainstorms. It’s important for companies to protect their competitive advantage, but make sure you’re protected as well in understanding the scope of these responsibilities.

For advocacy and beyond!
The Ask Ginkgo Team

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