8 Tips to Give Your Confidentiality Agreements Teeth (In a Post-Non-Compete World)

An employee with access to customer lists and other key business information leaves the company. You want to enforce your confidentiality agreement, but with the recent restrictions on non-competition/non-solicitation clauses, there’s not much you can do to stop them from using it – right? WRONG! California employers should be forward looking and act now to protect their confidential information. Even in this harsher landscape, employers can take some practical steps to give teeth to their confidentiality agreements:

1. Conduct an audit to confirm information is kept confidential:
   • Identify the specific types of information that you want to protect;
   • Ensure the information is safeguarded by passwords;
   • Restrict who can access to the information;
   • Require employees to be logged into their personal accounts when accessing the information;
   • Use your technology to prohibit the copy or transfer of such information; and
   • Monitor all transfers of such data.
2. Require employees to sign enforceable confidentiality agreements (without non-compete clauses):
   • Ensure the scope of confidential information is reasonable/lawful;
   • Make sure to define confidential information with specificity, where possible;
   • Be clear in your expectations;
   • Consider the National Labor Relations Act (e.g., exclude certain terms from the definition of confidential information, such as “terms of agreements,” “payroll information,” “staffing information,” etc.) to avoid confusion that such confidential information would affect the terms and conditions of an employee’s employment; and
   • Consider adding explanations as to why certain information is confidential (e.g., because the employer has invested significant money in the resource that gives it a competitive advantage).
3. Confirm all disclosure and use restrictions are for legitimate business needs.
4. Where data must be transferred to a third party, such as a vendor, require a Non-Disclosure Agreement:
   • Consider adding certain vendors to a “safe to share list” after they have signed an NDA, so employees do not ask clients to sign multiple NDAs.
5. Don’t inadvertently restrict employees’ right to work after separating.
   • An overly broad confidentiality agreement could be interpreted as an unlawful non-competition agreement and forfeit its enforceability.
   • Add a provision that says: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”
   • Do not restrict an employee’s ability to report unlawful acts in the workplace.
6. Consider whether your company’s AI-derived data is protectable. For example, pricing models based on internal invoice reviews, customer profiles, compilations of otherwise private information, etc.
7. Add a Defend Trade Secrets Act Disclosure. Employers should include this disclosure to provide employees with the required notification of rights under the Defend Trade Secrets Act (“DTSA”) (e.g., for whistleblower rights) and, importantly to employers, maintain their right to obtain all available remedies for breaches of the DTSA.
8. Include a provision that employees should consult with an attorney before entering into the agreement.

Implementing these tips will help you ensure you have enforceable confidentiality agreements in this post-non-compete world. 

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