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3 Benefits of a Confidentiality Agreement

By Eric Misterovich

Employers are often faced with striking the proper balance between protecting the company and pleasing employees. This issue can come to the forefront when management requires employees to sign a non-competition, non-disclosure, or confidentiality agreement.

When a company is weighing its options regarding confidentiality agreements, it should understand why they are important and the function they serve.

1. Information is Confidential Based on Your Actions to Keep it Confidential

All confidentially agreements will contain a lengthy paragraph defining what constitutes “confidential information.” Defining confidentiality information is the first step in ensuring the information is protected.

When a potential breach of a confidentiality agreement is brought before the court, the defendant will attempt to poke holes if the definition of “confidential information.” By creating a policy, your company is given the responsibility to see that it is followed. This means instituting a procedure to ensure documents and other information are marked confidential and treated as such. Consistent enforcement of this policy will preempt potential arguments by a future defendant.

The written agreement is a fundamental step in this process and gives businesses the framework to build a sturdy confidentiality platform.

2.    Just Because You Consider Information Confidential, Does Not Mean the Law Will Protect It

The law is not designed to protect every piece of information you consider to be confidential. Federal law will protect your trademarkscopyrights, and patents, and state law will protect your trade secrets, but your confidential information may not fit within those groups. Without a confidentiality agreement in place, that information is at risk.

For example, let’s consider customer lists. Surely a customer list is a vital piece of information within a company. Many companies would not want their competitors to have access to its customer list. But, a decision by the Eastern District of Michigan, in Wysong Corp v MI Indus, 412 F Supp 2d 612, 629-30 (ED Mich 2005) (citing Hayes-Albion v Kuberski, 421 Mich 170, 184 (1984), makes it clear that trade secret law will not protect that customer list, unless a confidentiality agreement is in place.

This reality must be weighed when a company is determining whether a confidentiality agreement is right for its business and employees.

3. Leverage for the Future

Building and growing a business is not just about putting out the daily fires. Long-term planning is what positions businesses to take additional risk and reap greater benefits.

While all may seem calm at the moment, things change. Employees will leave for any number of reasons. Is your business ready for a high-level employee to leave? What if the separation is on bad terms? Would your business be concerned about the employee using certain information with a competitor?

A confidentiality agreement shoulders this burden by creating specific duties for employees, and former employees, to follow. Further, it will provide your company with an avenue of relief to prevent the disclosure of information before it happens. Finally, it will be drafted to make the breaching party liable for your costs and attorney fees, providing you greater leverage in any negotiations.

Tailor a Confidentiality Agreement for Your Business Today 

To speak with an attorney experienced in creating, enforcing and defending confidentiality agreements, contact Revision Legal today. With offices in St. Joseph and Traverse City, and a commitment to communicate electronically in our paperless office, Revision Legal represents businesses anywhere in Michigan.

Contact Revision Legal by calling 855-473-8474.

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