NewsBeat

May/June 2017 NewsBeat 13 By BRYAN BORZYKOWSKI A mountain of paperwork to sign is par for the course when you start a new job, and one of the most common documents you'll find — and one of the more important for employers — is the confidentiality agreement. With business becoming increasingly more competitive, protecting secrets, client lists and other sensitive information is a must. However, just getting an employee to sign an agreement doesn't make it enforceable, said Ryan Vann, an employment and compensation partner at Baker McKenzie, a Chicago-based law firm. Organizations must make sure it contains the right language; then, if they believe an employee has breached it, they have to prove it, even as they ensure they're not overreaching. All that is often easier said than done. Don't Protect Everything When drawing up a confidentiality agreement, executives need to think about what they want protected. Pay rates for senior executives, trade secrets, customer contact information, the "special sauce" that makes an organization tick — these things can be covered, but only if they pertain to the job of the employee who's signing the agreement, said Vann. Organizations may run into problems when they try to cover everything. If an agreement is too broad, a court could throw out the entire contract. "Companies often take a one-agreement-fits-all approach, but that's either unenforceable or, in some circumstances, unlawful," Vann said. Businesses can potentially run into problems when they don't allow employees to discuss salaries with their co-workers. This is a usual practice for C-suite executives and senior staff, but adding it to an agreement for non-supervisory employees, which some organizations do, could run counter to the National Labor Relations Act. In addition, businesses can't protect every bit of information employees learn while under their employ, said Matt Keiser, a partner with Washington, D.C., law firm Kirkland & Ellis LLP. "Information has to be nonpublic information that the employer actually takes steps to keep confidential," Keiser said. Remember The Defend Trade Secrets Act April 2016 saw a new law enacted that allows organizations to sue employees who reveal trade secrets in federal courts rather than in state courts, as they do now. If organizations choose to go to federal court and they win, they can claim double the damages and get the employee to cover attorney costs. But organizations can do this only if they add specific whistleblower protection language into their confidentiality agreements. The wording organizations should use can simply be taken from 18 U.S. Code 1833(b)(1) in the Defend Trade Secrets Act; the text states that individuals bear no criminal or civil responsibility if they reveal a trade secret related to the violation of a law. "If you don't have that clause, then you can't go after additional fees," said Vann. Prove The Problem Organizations need to prove that what a former employee revealed was indeed confidential, said Keiser. If they can prove that information was not for public consumption — let's say it was password protected, stored out of public view or kept in a safe — they can say it was confidential material. Executives may also have to prove that their business was harmed by having that confidential information leaked. That might be harder to do, said Keiser. A business could show that its competitor won a new contract because of the disclosure, or that it had some unfair competitive advantage. However, if it can't prove damages, it might not win the case. It can be easier for an organization to sue for an injunction and try to halt whatever the other business is doing. In this type of scenario, specific damages don't have to be proven. "That's where most of these cases go," Vann said. "They go this route instead of actually having to prove damages down the road." Sue The Organization, Not The Person Even if a former staffer breaks an agreement, an organization may not want to go after him or her. Why? Because that person likely can't pay damages. The plaintiff can get them to stop sharing information, but that's about it. In some cases, an organization can stop severance payments to an employee, but of course that works only if the person is still collecting checks. It can be more effective to go after the former employee's new business. The new business can likely pay damages and will have to stop using the information it has gleaned. With that in mind, it's a good idea for organizations to ask potential employees if they've signed a confidentiality agreement and what it covers, Vann said. They should then avoid any situations where that agreement could be broken. Agreements Can Be Enforced Forever Once a confidentiality agreement is signed, it's enforceable for life. An employee can never reveal his or her former organization's secrets. If the organization itself reveals the secret — for example, by launching a product it has been working on for years in secrecy — then there may be nothing left to keep confidential. Information may also not be protectable if it's old, said Vann. Salary data, for instance, could be out of date within a year. There are often other, smaller items an organization should include in an agreement. It might stipulate, for example, where potential legal action would be litigated and what would happen if the business were to be sold to another entity. Whatever the details, generally, if organizations spell out what they want protected, if their expectations aren't unreasonable and if they can prove the information was confidential, they stand a good chance in court. "There's always different circumstances that come into play," Keiser said, "but generally these are enforceable." For more information and for more articles like this, visit adp.com/spark. Bryan Borzykowski has written three books on personal finance. He also writes about businesses and technology. Bryan is on Twitter: @bborzyko. Is a confidentiality agreement worth the paper it's printed on?

• Cover