Confidentiality Agreements in Employment Contracts

A confidentiality agreement, also known as a “non-disclosure” agreement, is a written legal contract between an employer and employee. The confidentiality agreement lays out binding terms and conditions that prohibit the employee from disclosing company confidential and proprietary information. A confidentiality agreement is in effect for the duration of an employee’s employment and for a period of time following employment termination. Confidentiality agreements can be included in the person’s employment contract, or they may be signed as a separate agreement later on as required.

Why include a confidentiality agreement in your employment contract?

Employers benefit from confidentiality agreements because they keep these parties from sharing proprietary knowledge, trade secrets, client or product information, strategic plans, and other information that is confidential and proprietary to the company with competitors. Confidentiality agreements state that the employee cannot disclose or in any way profit from company confidential information supplied.

What is a breach of a confidentiality agreement?

A breach of a confidentiality agreement may arise when a person discloses information that they have agreed to keep private. Some examples of breaches of confidentiality agreements may include:

• Publishing confidential information in a written document, newspaper, online article, or other such publication;

• Orally disclosing the information to another person;

• Revealing the information through non-verbal communication;

• Showing other persons a product or item that is not intended to be seen yet; and
• Providing information for formulas, recipes, construction plans, and other instructions for production.

What are some remedies for a breach of a confidentiality agreement?

For breach of contract cases, there are several different types of monetary remedies:

• Compensatory damages: When compensatory damages are awarded, a court orders the person that breached the contract to pay the other person enough money to get what they were promised in the contract elsewhere.
Restitution: When a court orders restitution, they tell the person that breached the contract to pay the other person back.

• Punitive Damages: This is a sum of money intended to punish the breaching party, and is usually reserved for cases in which something morally reprehensible happened.

• Nominal Damages: A court awards nominal damages when there has been a breach of contract but no party to the contract suffered any harm.

• Liquidated Damages: These are damages that the parties agree to pay in the event a contract is breached.

• Quantum Meruit: A court can award one party payment for what they deserve for any work that she performed before the other party breached the contract.

There are also remedies in equity available for breach of contract cases, which include:

• Cancellation: The court cancels the contract and decides that the parties are no longer bound by it.

• Specific Performance: When the court forces the breaching party to perform the service or deliver the goods that they promised in the contract.