Protecting Sensitive Business Information

All businesses have sensitive business information:  customer lists, pricing information, supplier lists, supplier pricing, profit and loss, internal procedures, compensation—to name just a few.  And most businesses have employees, independent contractors or both, folks with access to some or all of this sensitive information.  It is this access that can cause problems when the information is misused.

One way to protect your business’ sensitive information is to have every employee and independent contractor agree in writing to keep that information confidential and to use it only for the benefit of your business.

I am not talking about agreements with non-compete provisions.  Non-compete clauses in agreements with employees or independent contractors can be tricky to implement properly.

I am talking about confidentiality agreements (also known as non-disclosure agreements).  These agreements are easy to put in place can work well to protect your business’ sensitive information.

Confidentiality agreements work when the employees or subcontractors who sign them honor them.  Even the most cynical of us believe that some percentage of these employees or subcontractors will honor them.

But what of those who choose not to honor them?  What happens when someone who signed such an agreement violates it?

The answer is that your business will have a contract claim against the person misusing your information.  And that is not nearly as good as when a confidentiality agreement is honored.  You will have to weigh going to court to obtain an injunction against misuse of your information; and obtaining an injunction will cost money.

But, a well-drafted confidentiality agreement can reduce the cost of pursuing an injunction and can provide that, if your business gets an injunction, the bad actor will have to pay your legal fees.

Bottom line:  confidentiality agreements provide benefits to businesses looking to protect their sensitive information in the hands of employees and independent contractors.  And the costs of preparation and implementation of these agreements is not substantial and far outweigh the benefits.