Violation of Confidentiality

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If you sign a confidentiality agreement, you face severe consequences for breaching it.
If you sign a confidentiality agreement, you face severe consequences for breaching it. (Image: James Woodson/Digital Vision/Getty Images)

President John F. Kennedy once said, “The very word 'secrecy' is repugnant in a free and open society; and we are as a people inherently and historically opposed to secret societies, to secret oaths, and to secret proceedings.” The president was obviously not referring to the business world, in which confidentiality remains a vital part of how companies run. To protect proprietary information, many firms require employees to sign nondisclosure agreements. If workers breach confidentiality, they can face disciplinary action or termination.

Definition of Confidentiality

Confidentiality stems from the concept of privacy. In their 1979 book on confidentiality, researchers Robert Boruch and Joe Cecil defined privacy as people’s interest in controlling others’ access to themselves. The researchers go on to say that confidentiality refers to people’s concern with handling personal data and others’ availability to it. In the business world, confidentiality pertains to different kinds of data. This data could be from personnel files, research on potential products or exclusive formulas.

Nondisclosure Agreements

To ensure confidentiality, many companies require new employees to sign a nondisclosure agreement. The nondisclosure agreement is a legal document in which the signers promise not to release secret information disclosed during employment. Companies can also use nondisclosure agreements during business transactions with other firms. This contract contains the types and categories of the confidential information, the obligation of the party receiving the data, the time period for which the information remains secret, and other miscellaneous provisions, such as which state’s law applies in the event of a breach of confidentiality.

Legal Implications

A nondisclosure agreement has serious legal ramifications in the event that the party receiving the information divulges it before the time period expires. In 2010, the HILB Rogal and Hobbs Company successfully proved in court that its former vice president was guilty of breaching his confidentiality agreement. Before he resigned and went to work with a competitor, the defendant copied the contents of his work computer’s hard drive, which contained, among other things, business strategies and account files.

Exceptions to the Rule

There might be instances in which it will be better to breach a confidentiality agreement than to remain silent. In 1996, Jeffrey Wigand, an employee of Brown & Williamson Tobacco Company, revealed that the firm had purposely hidden and withheld information about the lethal and addictive nature of cigarettes. In spite of being bound by a confidentiality agreement, Wigand felt he could no longer fulfill the contract when his former boss lied about nicotine being addictive in front of Congress.

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