Employment Confidentiality Laws

By Cindy Hill

Confidentiality is a critical component of the employer-employee relationship. Confidentiality agreements and non-competition clauses preclude a former employee from using valuable business information, like customer lists or vendor contacts, at a new place of employment. Trade secrets laws also preclude former employees from profiting on recipes or proprietary processes learned from a former employer. Familiarity with employment confidentiality laws helps employers protect their interests and helps new business owners avoid legal entanglements with prior employers.

Non-Disclosure Agreements

An employment confidentiality, or non-disclosure, agreement is an agreement between an employer and employee in which, as a condition of employment, the employee agrees she will not disclose to others any confidential information she acquires regarding the employer's enterprise. An employer may also ask an independent contractor to sign a confidentiality agreement as a prerequisite condition to being engaged for contract work. The specific terms of confidentiality agreements vary depending on the type of business, but they typically contain clauses defining what information is confidential, any exemptions to the non-disclosure terms, and how long the employee must keep the information secret.

Enforcement

When a confidentiality agreement is a condition of employment, a current employee who breaches such an agreement may expect to lose her job. However, employers can also sue current or former employees for breach of contract. If the employer prevails in the lawsuit, the court may grant him injunctive relief -- an order telling the former employee to stop breaching the agreement -- as well as monetary damages. Some confidentiality agreements contain a liquidated damages provision, which is a clause stating what amount of monetary damages the employee will pay if the agreement is breached.

Ready to start your LLC? Start an LLC Online Now

Trade Secrets

Even if you did not sign a confidentiality agreement with your former employer, you may still be subject, through trade secret laws, to legal restrictions on the use of information you were exposed to while you were employed.The Uniform Trade Secrets Act, adopted by most states, protects any information that is of value to a business, primarily because such information is not generally known to others. The employer must take reasonable steps to safeguard his trade secrets from disclosure in order to maintain the protection of trade secret laws. Violation of trade secret laws can result in injunctions and monetary damages.

Avoiding Breach of Confidentiality

A confidentiality agreement provides your former employer with a basis upon which to take you to court, causing great expense that may bring your new business to a halt or cause you to lose your new job, even if he does not ultimately prevail. Consulting an attorney prior to leaving a job which involves a confidentiality agreement can help you more fully understand your risks and obligations. Careful compliance with the literal terms of the agreement by starting your own client lists, developing your own products and avoiding use of trade secrets from your former employer will help to avoid a finding of breach of confidentiality. Consider whether your new business is really in competition with your former employer, as well as whether a team of colleagues from your former employer is joining your new venture, which may signal a high likelihood of breach of confidentiality.

Ready to start your LLC? Start an LLC Online Now
What Are the Copyright Laws for Images?
 

References

Related articles

How to Add a Partner to a LLC Using Sweat Equity

The existing members of a LLC have great flexibility to establish the procedures for the admittance of new members. As long as the LLC operating agreement doesn´t prohibit it, new members can join the LLC on the basis of "sweat equity," rather than having to contribute cash or property to the business. This means that a new member promises to perform services in exchange for an ownership interest in the LLC.

What Are the Benefits of a Prenuptial Agreement?

Suggesting a prenuptial agreement with your intended spouse can drain the happy anticipation right out of your wedding plans. But if you're facing a divorce, it's a safe bet that you're glad you had your soon-to-be ex spouse sign one. As a result of your prenup, you enjoy a level of protection that some spouses don't have. If you haven't married yet and are dreading bringing up the subject, consider another advantage: a properly drafted prenuptial agreement can be a great estate-planning tool as well.

New Jersey LLC Owner Information

Although the LLC business structure in New Jersey limits an owner’s personal liability, the LLC’s owners, also called members, must still comply with a multitude of state guidelines. As in many states, these include tax reporting, licensing and permits. In addition, while not required by law, there are agreements among the owners that can streamline the company’s day-to-day operations.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

Consequences of Breaking an LLC Operating Agreement

The members, or owners, of a limited liability company are bound by the rules and provisions of the company's operating ...

Nonprofit Code of Conduct

Many nonprofit organizations create a code of conduct for the organization, not only to address common workplace ...

Can I Form an LLC While Employed or Working at Another Job?

Many people hold down two jobs to make ends meet, or dream of owning their own business while working day-to-day in a ...

Software Copyright Issues

A copyright protects an original work of authorship by giving the copyright holder a monopoly on the right to ...

Browse by category
Ready to Begin? GET STARTED