Employer/Employee Confidentiality Agreements

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Employees cannot share their employer's confidential information with people outside the organization.
Employees cannot share their employer's confidential information with people outside the organization. (Image: Jupiterimages/Comstock/Getty Images)

A confidentiality or non-disclosure agreement, or NDA, is a written contract between an employer and employee. Businesses may require employees, contractors and consultants to sign confidentiality agreements before they begin working for the business. A confidentiality agreement may also be part of a severance agreement when an employee resigns or is terminated. In the confidentiality agreement, the employee agrees to not disclose certain information to third parties.

Confidential Information Definition

Generally, the term “confidential information” is defined in the context of the business as part of the confidentiality agreement. It may include product information; cost and pricing; research or development information; customer lists; inventions, legal matters, data and drawings; or any other private information about the business, its operations, organization or plans. The definition also specifies information format covered by the agreement, such as oral, written, digitally stored or transmitted data and information.

Agreement Contents

In addition to the definition of confidential information, an agreement includes an explanation of the employee's duty not to disclose confidential information along with a time limit on the duty, which may continue for a specified number of days or months after the employee, consultant or contractor leaves the organization. The agreement includes penalties for violating the agreement.

Employee Work Product

Work product is anything created by an employee in the course of their work. It may include anything an employee creates, develops or invents on the job. Employee work product is included in the confidentiality or non-disclosure agreement. For example, computer programmers develop systems for their employers and all aspects of the system, including computer code, data, materials, images, graphics and documentation related to the system are owned by the employer and protected by the confidentiality agreement. When an employee resigns or is terminated, he must return all work product and supporting materials to the employer.

Employee as Agent

Employees are “agents” of the business that employs them and as agents they have an obligation to protect secrets, property, processes, intellectual property and other assets belonging to the employer. Even when there is no formal confidentiality agreement in place, the employee is still obligated to keep company information private and cannot publish or use it without the instruction or permission of the employer.

Penalties

If an employee violates a confidentiality agreement, the employer may fire them and may sue for damages in civil court. Under the federal Economic Espionage Act of 1996 and many state laws, violating a confidential agreement may be a crime depending on the situation. If convicted under these laws, a person may face both fines and jail time.

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