Protecting your Confidential Assets Contractually
October 19th, 2017 by Bunch & Brock
In most businesses, whether they be small or large, success can often be attributed to innovative and original ideas and practices. Of necessity, when new employees come on board, they are taught these innovative methods in order to make sure that they can implement them and push forward the best interests of the company. However, while teaching employees these methods is necessary and has its advantages, there is also the potential for a very negative flashback.
Purpose of the Contracts
If things don’t work out with Company A, there is very little to stop a terminated employee from using their strategies, techniques and innovations with Company B – essentially using the first company’s techniques against them. This could potentially eat into the Company A’s business, put pressure on their ability to make a profit and, in the worst-case scenario, saturate the market to the extent that it makes the practices standard, leaving no advantage for the first company at all. That is why it is vital that employers make signing non-disclosure and/or non-compete agreements mandatory for employees in sensitive positions.
First of all, non-disclosure and non-compete agreements are not the same thing. According to Find Law, a legal information publication, a non-disclosure agreement is a contract in which an employee, contractor or customer agrees not to disclose confidential information. The contract generally includes:
- Specifically what confidential information cannot be disclosed
- Exceptions to what may or may not be disclosed and to whom
- Responsibilities for being given the information
- Time limits for the agreement.
In contrast, again according to Find Law, non-compete agreements are not always approved of because they may inhibit an individual’s ability to make a living. A non-compete agreement essentially suggests that, after a business relationship has ended, a former employee may not work in the same field as his or her former employer and essentially compete against them in the same field or market. While the agreement may be made in the same spirit as the non-disclosure agreement (in order to protect confidential information), the law requires other stipulations, and must:
- Be supported by consideration at the time it is signed
- Protect a legitimate business interest of the employer
- Be reasonable in scope, geography, and time.
Are They Worth It?
In the end, according to Legal Nature, both contracts are ultimately seeking the same end: to restrict the ability of an employee or a former employee to harm their original company. These agreements have become much more popular in only the last 20 years or so, with the rise and rapid evolution of technological processes and computer-based digital information, including programs and codes. Although both types of agreement are now a vital necessity in many industries, their effectiveness has been questioned. While a company may sue if either of the agreements, is broken, often the damage has already been done.
Bunch & Brock, Attorneys at Law, take great pride in serving their neighbors in the community. With 35 years of experience working from offices in Lexington, Kentucky, Bunch & Brock have the knowledge, resources and experience to help with all your legal needs. If you have legal questions or would like to set up an appointment, contact us online or call us today at 859.254.5522.