Confidentiality Agreements... Ticking Time Bombs?

Guest post by: Marijo McCarthy
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What's An Opinion, Anyway? - By Marijo McCarthy

How many times have you signed a new contract which included "confidentiality" or "non-disclosure" provisions and simply assumed that it was not a big deal?

After all, you're a business owner with honor and integrity; you have no intention of disclosing your client's confidential and proprietary information, right? So, why worry about it? Simply sign the thing and move on to the work.

Well, not so fast. Let's delve into the small print a bit and see what you just agreed to…

Most confidentiality agreements include standard protective language which makes these agreements cover a universe of people who might come into contact with the client's confidential information — the responsible parties almost always include more than you, the business owner and signer of the agreement.

What about, for example, your employees? Are they aware of the confidential nature of the information with which they come in contact? Do they have the same standards of honor and integrity as you?

Or how about those consultants you hire to provide particular expertise for a client's project and over whom you have little to no employment control? Can they get you into trouble?

In both cases, uncertainty can hurt you!

Let's review just one sample of language that might be found in a contract or an accompanying confidentiality agreement:

"Except as expressly allowed herein, the receiving party will hold in confidence and not use for any purpose other than as necessary to perform its obligations under this Agreement or disclose to any third party any Confidential Information of the disclosing party and will similarly bind its employees and agents who have access to such Confidential Information."

If you sign this contract, you have agreed to "bind your employees and agents" to provide the same protection you have just agreed to give. The question is, how do you "bind" those parties?

The answer is simple, but important… be sure that they:

have already signed a confidentiality agreement with you as their employer, or

will sign a confidentiality agreement as a third party consultant to your company.

It's simple protection for your company, but often overlooked in the flurry of getting down to work on a new contract.

If your business services require that you routinely bind your employees to protect the confidential information of your clients, the concerns are fewer [although not non-existent]. If, however, this is an occasional occurrence for you (your employees are not automatically required to sign confidentiality agreements as a condition of employment), now is the time to put one in place… before that employee is assigned to work on the new client's project.

If you ignore this simple protective measure and confidential information is leaked… carelessly or deliberately… your company is on the hook for any damages your client may suffer as a result of that leak. You promised in an enforceable contract to protect the client's information and you took no precautions to do so.

Remember, protective procedures help in the defense of your company from charges of negligence or wrong doing. These three simple steps may go a long way towards shielding your company from those damages:

Make sure that your employees and outside consultants sign confidentiality agreements if your company routinely signs them as part of client work.
Establish a company-wide procedure for protecting a client's confidential information and document it.
Allow a client's confidential information to be available only to those employees and consultants who have been specifically assigned to work on a client's project [many confidentiality agreements that your company will sign require this, so make it part of your routine].

Remember that old saying about an ounce of prevention being worth a pound of cure? It's never been more appropriate than in your protection of confidential client information!

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What's An Opinion, Anyway? - By Marijo McCarthy

About the Author: Marijo McCarthy

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Marijo McCarthy is principal of Widett and McCarthy, a Boston-area law firm that helps small business owners grow their businesses with pragmatic legal advice, mentoring and a solid team of professional advisors.
Click here to visit Marijo's website.

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