Over the years, I’ve helped clients figure out the best way to protect their business without creating untenable roadblocks. Entrepreneurs are juggling so many details, it can be VERY tough to decide where to focus attention and energy. Chances are, if you’re working towards monetizing a new idea or product, you’ve spent a few sleepless nights wondering whether your “secret sauce” is safe.
The good news is that businesses have access to three types of contractual provisions that can make all the difference if a current or ex-employee is tempted to reveal your secrets. In order for these agreements to be successful, companies must carefully consider long-term goals and approach employee agreements and policies in a deliberate manner.
All three types of provisions may be included in one agreement. I recommend that my clients develop one core agreement which can be customized based on the class of employee.
Non-Disclosure or Confidentiality provisions may be included in employment handbooks, in policies, in specific non-disclosure agreements or all of the above.
First, identify the information you need to protect. Do you have patents, copyrights, customer lists, specialized processes or other business ideas that are still “in the works?”
It’s a very good idea to make sure all of your employees know what you consider “confidential” and that they also understand they must not reveal or misuse your confidential information. It’s always a good idea to put a “confidential” notice on protected documents.
Next, put systems in place to protect that information (passwords, restricted access).
Put it in writing. Make sure you require new employees to sign a confidentiality agreement, handbook, policy or any combination of the three.
Before you ask for a signature from your staff, make sure the language is good! Too many non-disclosure agreements are complicated and dense. Don’t let that happen. Your employees are more likely to comply and start off with a positive attitude if they’re presented with a readable and logical agreement. You also want to make sure your HR team and management understand this agreement!
Finally, consider which employees should sign off on non-disclosure obligations. Generally speaking, it’s a good idea that confidentiality requirements apply to everyone in the company. After all, anyone could come across confidential information and it’s not a hardship for your employees to protect your confidential information.
Non-Solicitation provisions are typically found in agreements instead of policies. Non-solicitation agreements prohibit current or former employees from poaching customers and other employees from your business.
This kind of agreement might be appropriate for many employees, but you should still think about your big picture goals before you put this agreement in front of everyone. After all, if you own a brokerage firm, are you really worried about your receptionist stealing your employees or customers? Non-solicitation agreements will probably be more effective if you focus on key employees. For example, a software company should probably require sales staff and programming staff to sign non-solicitation agreements but it might be overkill to ask copy room staff to do the same thing.
Non-Compete Agreements are enforceable in Texas and many other states if they are carefully drafted. Non-competes are trickier to enforce because courts don’t want companies to overreach and prevent anyone from making a living.
Companies should definitely resist the urge to force low-level (non-key) employees to sign these agreements. It’s extremely unlikely that a court would enforce a non-compete against a low-level employee. If you make everyone sign non-competes but don’t intend to enforce all of them, your HR team and managers are going to be in a tough position when new employees ask questions about the agreement. I guarantee they’ll end up saying “Oh, don’t worry about that. It doesn’t apply to you but everyone has to sign it.”
That kind of communication only hurts your company because you’re setting up a culture which encourages employees to ignore your written policies. It’s in your interest for everyone to keep your information confidential, so don’t risk telling employees to ignore part of the agreement!
I can answer questions about how your business can best protect proprietary information with efficient and logical agreements.