What is an Employee Confidentiality Agreement?

An employee confidentiality agreement is an agreement entered into between an employer and an employee. The agreement states that the employee will hold close any and all trade secrets, proprietary information, intellectual property and other confidential information that he or she becomes privy to during the course of his or her employment. An employee confidentiality agreement is not meant to show a mistrust of the employee, rather its purpose is to keep an employer’s carefully formulated trade information out of the hands of competitors.

In many businesses, employees might come into contact with information that is of a sensitive nature. This might be something such as a specially formulated recipe, a scientific formulas created by the owner or sensitive customer information. If this information were to be given to a competitor or otherwise disbursed to outside parties, it might be used to compete directly against the originator or to hurt other individuals involved. A signed employee confidentiality agreement provides proof that an employee has been informed of his or her responsibility to keep this type of information — as specified in the agreement — confidential.

Simply having a signed employee confidentiality agreement does not prevent an employee from sharing trade secrets and other intellectual property with others. This information still might be leaked to outside sources. The importance of the document is that it provides proof that the employee in question was aware of his or her responsibility to keep this information private. If it were ever necessary to take an employee to court over such matters, one of the first things a judge might want to review is the employee confidentiality agreement.

The agreement might contain sections devoted to duties, nondisclosure to unauthorized personnel, property rights and no guaranty. “Duties” might outline the specific tasks for which the employee is responsible. The inability to share confidential information with unauthorized individuals might be outlined in the “Nondisclosure to Unauthorized Personnel” section. A requirement to transfer rights to any products developed while working at the company might be set forth in a “Property Rights” section, and the stipulation that the agreement does not constitute a binding offer of employment might be covered in a “No Guaranty” section.

As is the case with any legal document, an employee might consider obtaining the services of an attorney to review the employee confidentiality agreement. This might help ensure that the employee is entering into an agreement that he or she completely understands. He or she also might want to keep a copy of the signed agreement.