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Understanding an Employee Confidentiality Agreement [Free Template]

5 min read
employee confidentiality agreements

If your business has sensitive information that needs protecting, an employee confidentiality agreement may be the best way to preserve privacy and ensure the integrity of your business’s data.

If you’ve ever been to the doctor, you probably take for granted one of the most famous confidentiality agreements of all time: the HIPAA law which protects the privacy of the doctor-patient relationship. In other industries, these agreements are used to protect assets, intellectual property, customer information and more.

Here, we’ll explore the intricacies of these vital agreements. We’ve even included a printable confidentiality agreement below to help get you on the right track.

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What is an employee confidentiality agreement?

A confidential disclosure agreement, also called a confidentiality agreement or CDA, is a legal agreement which prohibits employees from disclosing certain information about a company. It is a permanent agreement, which means a signed confidentiality agreement remains valid after employment has ended. 

For some businesses, including a confidentiality clause in an employee’s contract will suffice. For other businesses, a CDA agreement will be a separate document with various provisions and clarifications. Ideally, businesses will ask a new hire to sign confidentiality agreements before their first day. If asking tenured employees, businesses should pair the request with a bonus or contract renewal.

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Employee non disclosure agreements and non circumvention agreements 

An NDA, a non disclosure agreement, serves more or less the same function as a confidentiality agreement. An NDA agreement is more commonly used for transactional arrangements, such as those between vendors and buyers, while CDAs tend to be more common in employment contracts. However, both agreements are used to protect sensitive information. In the UK, these pacts are often known as non circumvention agreements.

NDAs can apply to one, two, or three parties. A one-way NDA, also called a unilateral NDA, would be more typical for an employer-employee relationship. This agreement assumes only one party (the employee) will receive and thus be responsible for protecting sensitive information. A two-way NDA, also called a mutual NDA prohibits both parties from disclosing information about the other. A 3 way nda, or multilateral NDA will involve 3 or more parties, at least one of which expects to reveal sensitive information.

Chances are a unilateral NDA should do the trick for a business hoping to keep information private. Our employee NDA template below should provide a good confidentiality or non disclosure agreement example.

employee confidentiality agreement

Why have a confidentiality agreement?

Employees necessarily need to know a lot about the businesses they work for. A confidentiality contract is vital to protecting the company’s financial information, customer data, and intellectual property from incidental or malicious exposure. 

When they sign a confidentiality agreement form or basic non disclosure agreement, employees acknowledge that disclosing sensitive information is in breach of their contract and punishable by law. Without such an agreement, companies may have a hard time incentivizing employees not to share confidential information or prosecuting those who divulge company secrets.

In short, a company has little to lose and a lot to gain in implementing a confidentiality agreement. Businesses should err on the side of caution with a CDA.

How does a confidentiality agreement work?

Each employee confidentiality agreement will be tailored to fit the business’s needs. The language should be very specific what information is protected, as overly broad confidentiality agreements will not be enforceable. It is also important that the agreement be specific about the repercussions for violating the terms.

How long does a confidentiality agreement last?

In most cases, the information covered by a confidentiality agreement will be protected until it becomes common knowledge or is made public. The employee can also be released from their obligation by the company.

What can be covered by a confidentiality agreement?

A CDA or NDA can be used to protect any information the employer wishes to keep private: secret recipes, manufacturing processes, marketing strategies, client or sales contacts lists, or customer data. Employers should be as specific as possible when detailing private information.

What happens if a confidentiality agreement is breached?

If an employee does break a signed agreement, the business can take steps to enforce the remedies listed in the document. With the help of an attorney, businesses can take escalating steps such as sending a “cease and desist” letter, filing a restraining order, or finally, filing a lawsuit for damages.

What to include in a confidentiality agreement

A confidentiality agreement or non disclosure contract does not have to be complicated or filled with legal jargon. It need only cover the key information in a clear and straightforward manner. While some confidentiality agreements will contain further information, all will at least include the following:

  • Parties: The parties to the agreement should be specified at the start of the document. The organization would be considered the “disclosing party” and the employee would be considered the “recipient” of sensitive information.
  • Protected information: What information will be covered by the agreement? This section should detail exactly what information needs to be kept classified. Blanket statements barring the employee from disclosing “all” or “any” information will not hold up!
  • Exclusions: What situations are not covered by the agreement? List instances in which an employee would be permitted to disclose “confidential information” without violating the agreement, such as if the information has already been made public. Bear in mind that employees can be subpoenaed or legally compelled to reveal confidential information.
  • Term: How long will the agreement last? It can be a definite term agreement, which will eventually expire, or employers may obligate employees to keep the information confidential indefinitely, which is to say, forever. The term should be clearly specified to protect the organization.
  • Consequences: What happens when the employee non disclosure agreement is breached? Because of the damages which may result from a breach, businesses should clarify their intention to pursue legal remedies such as an injunction or lawsuit.
  • Additional provisions: Businesses may wish to specify which state’s laws will govern any disputes, or what materials employees need to return or dispose of if they should leave. Some employers may also include other restrictive covenants such as a non-solicitation agreement, which prohibits former employees from poaching their past clients or colleagues, or non-compete agreements. Whether these are enforceable will vary by state law, so employers are advised to review local policy.

Free Download 👉Employee Confidentiality Agreement Template.

Further considerations for confidentiality agreements

Getting a confidentiality agreement or non disclosure form signed shouldn’t be a headache. Follow these best practices to protect both your confidential information and employment relationship.

  • Give employees sufficient time to review the confidentiality agreement. This will make sure they clearly understand what is being asked of them.
  • Use an online non disclosure agreement with a digital signature to minimize inconvenience and ensure nothing is lost or misplaced. If using a printed version, make sure to get two copies– one for the employee and one for the business.
  • If possible, have new hires sign before they start working. Make sure to periodically remind employees of their obligations, perhaps in annual team meetings, to avoid any slip-ups.

Remember that your confidentiality needs may change over time and make sure to keep the agreement up to date and reflective of your company’s values. A well-executed employee confidentiality agreement will keep your company, and its future, secure.

Safely & securely store confidentiality agreements with Factorial HR.

Written by Valerie Slaughter

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