Wednesday, September 4, 2013

Is Your Confidential Information Adequately Protected?

Commercial nondisclosure agreements typically provide that confidential information will be kept in confidence, provided only to employees who have a need to know and who have been informed that the material is to be protected. In the event an employee breaches confidentiality, his/her employer is expected to pay for any damages that result.

It is less common to encounter agreements that require individual employees to be personally bound by the duty of confidentiality. The reason given is a valid one – individual employees generally do not have the means to pay for the damages that can result from unauthorized use or disclosure of confidential information.

This approach overlooks two exposures:

1. An employer has limited control over the actions of an employee. They may fire him or her, but that may not be a deterrent if the employee believes he/she has something valuable to sell.

2. Disclosure of certain information, such as personal financial records, requires immediate action.

Money damages collected months later may not begin to restore a damaged reputation, or the cost of regulatory proceedings.

Consider requiring employees who receive you confidential information to agree, individually, to keep your information in confidence and to grant you the right to seek immediate injunctive relief against them should they breach that confidence.

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