What to Put in Contracts that Protect Your Business’s Knowledge and Relationship Assets

When employees who play an important role leave to work for a competitor, what could happen to your business?  What if they reveal sensitive information or replicate systems you have built to deploy against you?  Protecting against privacy, confidentiality and IP secrecy breaches is not fun work – who wants to think about all the ways things could go wrong?  But it is important work.  Even current employees, vendors, suppliers and partners must be monitored.  What if, for instance, someone in R&D sends out an indiscreet email that a competitor then finds and uses it to retroengineer a secret business process?

Your company must maintain and enforce confidentiality to succeed.  Common law imposes few restrictions on employees’ actions, so you need to draw up and enforce contracts.  Below are areas to address and communicate in these agreements.

Confidential Knowledge Relating to the Business

Employees should obviously be free to use the general knowledge, skills and expertise they acquire while working in your company.  The law does not require them to attempt to forget what they have learned!  However, it does mandate that they refrain from using confidential information that belongs to employers or former employers.  Here is what to know:

  • During employment, confidential knowledge involves information such as trade secrets, business plans and customer lists.
  • Following employment, common law only requires employees to protect trade secrets. To that end, in your confidentiality agreements, ensure the safety of sensitive information that would not be considered “trade secrets.”  Define the areas you want to guard narrowly rather than broadly to increase the likelihood that the courts will enforce the agreement.

Social Media Content and Followers

In your agreements, state that content and contacts from social media like Twitter, Facebook and LinkedIn belong to your company.  Upon resignation or termination, employees must relinquish these assets, including passwords.

Restrictions of Activities

It may be necessary to ask employees to refrain from engaging in activities outside of the business that are work related to prevent them from divulging confidential information either intentionally or inadvertently.

Termination Provisions

For a limited time after employment termination, you can prevent an employee from recruiting your staff, soliciting your clients, and working for a competitor.  Again, to protect confidential knowledge and make sure the courts will be inclined to support your position, make the terms of this part of the contract narrow rather than broad.  You are looking to protect your business interests, not smother what the ex-employee can do or say!

When you compose the agreements, avoid an overly ambitious strategy.  Make your contract reasonable, and tailor it to how much access the employee has to sensitive information.  This approach will give you a stronger claim in case you need to take legal action, and ex-employees are far more likely to want to uphold such agreements if they are reasonable.

In addition, spend time educating employees about confidentiality issues.  Explain why you need these documents – it’s not to suppress people or deny them opportunities but rather to protect what you are building – and explain the penalties for violating the policies.