Your employees will inevitably gain access to your business’ confidential information during employment. Since confidential information and your business’ trade secrets can be incredibly valuable, there are considerable benefits to including confidentiality clauses in your employment agreement. This article outlines what a confidentiality clause is and the three benefits of having your employees sign one.
What is a Confidentiality Clause?
Employment agreements often include a clause restricting employees from disclosing confidential information they obtained during employment. Confidential information is any information the law or an employment agreement deems confidential. Accordingly, there are likely to be limits on who can access this information.
Additionally, it is common to find clauses that demand your employees’ to return or destroy confidential information upon their termination.
The following section will explore three key benefits of having your employee sign a confidentiality agreement.
1. Establishing Trust With Your Employee
It is important to build trust with your employees. This can facilitate a healthy corporate culture. Furthermore, it can ensure that both management and workers are on the same page when performing their individual responsibilities. Employees will likely have to use or be exposed to confidential information when performing certain tasks. Accordingly, in order to support this trust, consider including a confidentiality clause in your employment agreement.
If you have an enforceable clause, you can have greater assurance that when you provide your employees with confidential information, they will not misuse it. Ultimately, this means that your employees can complete tasks with the correct information.
Continue reading this article below the form2. Clarifying What is Confidential
Whilst this may seem like a given, confidentiality agreements typically define what information is ‘confidential.’ This can help your employees understand what information must remain confidential and clarify the ‘purpose’ of why your employees can only use certain information in certain ways.
Clarifying the ‘purpose’ for sharing confidential information with your employee can also help them better understand the task at hand. For example, the ‘purpose’ for sharing confidential information with your employee might be to discuss a possible commercial transaction with a third party. In this sense, clarifying the purpose for using certain information provides your employee with a greater contextual background to complete their task.
3. Outlining the Consequences of a Breach
As mentioned above, a confidentiality clause can deter employees from disclosing confidential information. This is because if an employee breaches the agreement, you can pursue legal action for breach of contract. An employment agreement will typically provide that if your employee breaches the agreement, you will likely suffer a loss, for which you may seek compensation.
Additionally, your contract might outline that you are entitled to apply to a court to receive an injunction. An injunction can prevent your employee from continuing to share confidential information, consequently limiting the harm caused by sharing the information.
In this sense, a confidentiality clause can be useful to set out employee expectations. An employee agreement can detail how to protect this confidential information and the consequences for breaching the agreement. By clearly outlining your agreement in writing, you and your employees will be on the same page when it comes to sharing confidential information. In this way, you can limit the likelihood of your employees sharing your business’ confidential information.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
A confidentiality clause in your employee agreement can prevent employees from disclosing confidential information to others. If your employee breaches the clause, you may pursue legal action. In this sense, the benefits of including a confidentiality clause in your employment agreement include:
- establishing levels of trust with your employee;
- clarifying what information is confidential and how your employees should use this information; and
- outlining the consequences of the breach to limit the likelihood of a breach occurring.
If you are considering including a confidentiality clause in your employment agreement, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Depending on the terms of your employment agreement, your employee may be restricted from disclosing confidential information obtained from your business. The restriction can apply both during and after their employment.
Confidential information is any information the law or an employment agreement deems confidential. This can include specific information such as business and marketing plans and strategies, company manuals, procedures, employee lists, financial information, and lists of supplies and clients.
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