One of the significant pitfalls businesses encounter is the misuse of confidentiality provisions in company policies and employment agreements. Nearly all employers include restrictive covenants prohibiting the use or disclosure of the employer’s “confidential information” outside the scope of the employment (e.g., after termination of the employment, or during employment but for a purpose other than the employer’s business).
However, many employers fail to properly implement these agreements and manage the information. For example, employers typically fail to ask themselves, what is “confidential information”? Not every piece of business information is “confidential information”, and Federal and state law provide guidance as to what information owned by the employer may be entitled to protection. Another key inquiry is whether that protected information is actually confidential. Many companies believe their customer names or lists are confidential. But if they advertise to the world on their website a list of their prominent customers, their customer list may not be confidential.
Employers also need to show they actual protect their “confidential information.” If the information is confidential, employers need to demonstrate that they treat it as such. For example, they may keep confidential files in secure locations or password protected files, or maintain a written policy or handbook addressing how such files are to be kept. An employer’s failure to satisfy any one of the inquiries can lead to a court refusing to provide “trade secret” or proprietary protection for its information. And that conclusion may not come until the employer has spent tens of thousands of dollars in litigation. So a proactive and vigorous procedure of determining and protecting confidential information is essential.