Creating an Employee Confidentiality Agreement

06/09/2023

32 min

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

When it comes to protecting a business’s intellectual property, trade secrets, and confidential information, employee confidentiality agreements are essential. Drafting the right agreement can be daunting however; there are several legal considerations to take into account depending on the particular state’s laws. To ensure that companies get the most out of their agreements and that their employees are properly protected, they must tailor their document to fit both parties’ needs.

Generally speaking, an employee confidentiality agreement should include provisions for what constitutes confidential information; a prohibition against disclosure or use of this information for personal gain; as well as a clause against misappropriation of said information. Failure to include such conditions could leave a company liable for any damages resulting from improper use or disclosure by the employee.

The purpose of an employee confidentiality agreement is two-fold: not only does it protect the company from potential legal issues down the line but it also provides individuals with an added layer of protection by making them responsible for any breach in confidence. Furthermore, if employees understand they will be held liable if they fail in their duty then they’re more likely to keep confidential information out of harm’s way in the first place.

At Genie AI we recognise how important such agreements are when it comes to protecting both employers and employees alike - which is why we created our open source legal template library so anyone can easily draft and customise high quality documents without having to resort to lawyers or consultancies (although partnerships with these services remain available). Our community template library holds millions of data points which teach our AI what a market-standard employee confidentiality agreement looks like; so you can have peace-of-mind knowing your contracts meet all state laws while ensuring that everyone involved has sufficient protection going forward.
For more detailed step-by-step guidance on creating an effective employee confidentiality agreement - as well as access codes for our template library today - ‘read on’ below!

Definitions

Legal Implications: The possible consequences of a legal agreement or action.
Legally Binding: Requiring that those involved in a legal agreement must abide by the terms of the agreement.
Essential Elements: The key components of a contract or agreement.
Compliance Guidelines: Rules and regulations that must be followed in order to adhere to a legal contract or agreement.
Remedies for Breach: The actions that can be taken against someone for violating a legal agreement.
Applicable Laws: Rules and regulations that must be followed in order to adhere to a legal contract or agreement.
Modify: To make changes to an existing agreement.
Enforce: To require that the terms of an agreement are followed.
Terminate: To end or cancel a contract or agreement.

Explain the purpose of an employee confidentiality agreement and the legal implications associated with it.
Outline the essential elements of a legally binding employee confidentiality agreement
Identifying information
Definition of confidential information
Exclusions from confidentiality
Duration of agreement
Remedies for breach
Describe the process for creating an employee confidentiality agreement
Research relevant laws
Draft the agreement
Have the agreement reviewed by legal counsel
Discuss how to ensure compliance with applicable laws
Understand the legal requirements
Follow compliance guidelines
Train employees on the agreement
Provide advice on how to handle potential disputes over employee confidentiality agreements
Encourage employees to follow the agreement
Handle non-compliance promptly
Actively monitor the agreement
Seek legal guidance
Explain how to modify an existing employee confidentiality agreement
Understand the original agreement
Draft a new agreement
Have the new agreement reviewed by legal counsel
Offer tips for communicating the agreement to employees
Explain the purpose of the agreement
Allow for questions and feedback
Emphasize employee responsibilities
Make sure employees understand the consequences of violating the agreement
Explain the importance of enforcing the agreement
Set expectations for compliance
Identify and address any potential violations
Consider the employee’s viewpoint
Describe the process for terminating an employee confidentiality agreement
Notify the employee in writing
Return any confidential information in the employee’s possession
Follow applicable laws when terminating the agreement
Offer tips for storing, securing, and destroying confidential information
Establish a secure storage system
Limit access to confidential information
Destroy confidential information securely

Get started

Explain the purpose of an employee confidentiality agreement and the legal implications associated with it.

Explain why it is important for employers to have an employee confidentiality agreement in place
Define what confidential information is, and how it should be protected
Outline the legal implications of sharing confidential information without permission
Explain what the consequences are for employees who breach the confidentiality agreement
Discuss the importance of having employees sign a confidentiality agreement before they begin work
Emphasize the importance of having employees sign a confidentiality agreement that is legally binding

Once you have outlined the purpose and legal implications of a confidentiality agreement, you can check this off your list and move on to the next step.

Outline the essential elements of a legally binding employee confidentiality agreement

Include the names of the parties involved: the employer and the employee
Specify the scope of the agreement, including what confidential information it covers and the period of time it will be in effect
Explain the employee’s responsibilities, including the obligation to maintain confidentiality and not to share the confidential information with anyone
Outline the consequences of a breach of the agreement, such as termination of employment
Include a statement confirming that the employee has read and understands the agreement and is legally bound to it
Have both the employer and employee sign and date the agreement

Once you have outlined the essential elements of the agreement, you can be sure that you’re adhering to the legal requirements necessary for it to be legally binding.

Identifying information

Identify the employee(s) who will be signing the agreement
Determine the employer or organization who is part of the agreement
Establish a date when the agreement will become effective
Include a signature line for the employee(s) and any witnesses
Include a signature line for the employer or organization

You will know you can check this step off your list when you have included all the necessary information related to the employee and employer, and the date the agreement will become effective. All the necessary signature lines should also be included.

Definition of confidential information

Research and define what type of confidential information you need to protect
Consider the various types of confidential information you want to protect and define them in the agreement
Make sure the agreement includes a list of specific examples of confidential information
Be sure to include definitions of confidential information that are broad enough to cover all possible scenarios
Check to make sure the agreement also specifies who is responsible for protecting confidential information
When you have a clear definition of confidential information in place, you can move on to the next step in the guide.

Exclusions from confidentiality

Make a list of exclusions from confidential information. These should include items that are not confidential and do not need to be protected by the agreement.
Exclusions can include items like publicly available information, information that is already known to the parties, information that is required to be disclosed by law, and information that is disclosed with the other party’s consent.
Make sure to include a clause that states that nothing in the agreement should be construed as granting a party a license to use any confidential information for any purpose.
Review the list of exclusions with both parties to make sure all items are covered and understood.
Once the list of exclusions is agreed upon, it should be added to the agreement.

How you’ll know when you can check this off your list and move on to the next step:

Once the list of exclusions is agreed upon and added to the agreement, you can move on to the next step.

Duration of agreement

Decide how long the agreement should last. This could be a specific date or an indefinite period.
Note if and when the agreement can be renewed.
Specify the date the agreement takes effect.
Add a termination clause that stipulates how the agreement can be terminated.
Once you’ve decided on the duration of the agreement, included the appropriate language in the document.

You can check this off your list when you’ve included the appropriate language in the document that outlines the duration, renewal, date of effect, and termination of the agreement.

Remedies for breach

Include a section in the agreement that outlines what remedies are available if the employee breaches the agreement.
Remedies can include things such as:
Termination of employment
Repayment of any compensation or benefits received
A requirement to return any confidential information that was obtained
Make sure to include language that allows the employer to pursue any and all legal remedies available to them if the employee breaches the agreement.
This section should also include language that either party can pursue arbitration instead of a lawsuit if the need arises.
Once you have included this section in the agreement, you can check it off your list and move on to the next step.

Describe the process for creating an employee confidentiality agreement

Understand the purpose of a confidentiality agreement and the implications of signing it
Draft the agreement to include the relevant information, such as:
Definition of confidential information
Restrictions on use and disclosure of confidential information
Restrictions on removing confidential information from the workplace
Restrictions on discussing confidential information with third parties
Restrictions on using confidential information for personal gain
Restriction on using confidential information to compete with the employer
Remedies for breach of the agreement
Seek legal advice to ensure the agreement is compliant with applicable laws
Have the employee sign the agreement
Provide a copy of the agreement to the employee
Keep the signed agreement on file

You will know when you can check this off your list and move on to the next step when the employee has signed the agreement and you have kept a copy of it on file.

Research relevant laws

Research the applicable state and federal laws regarding confidential information
Look into local laws that could affect the agreement
Take note of any applicable regulations
Review any applicable trade secrets laws
Identify any other applicable laws that could influence the agreement
Once you have identified all the applicable laws, you can move on to the next step and draft the agreement.

Draft the agreement

Gather all the necessary information from relevant sources such as legal counsel, local laws, and industry standards
Determine the scope of the agreement for the employee, including any specific provisions unique to their position
Consider any potential implications of the agreement and any potential risks the employee may face
Write the agreement, including all the necessary provisions
Have the agreement reviewed by legal counsel to ensure accuracy and compliance with relevant laws
Have the employee read and sign the agreement
Make a copy of the agreement and store it securely
Once the agreement is signed and stored, the step is complete!

Have the agreement reviewed by legal counsel

Contact an attorney familiar with the laws of your jurisdiction to review the agreement.
Ask the attorney to review the agreement for legal compliance and any other necessary changes.
Make sure the attorney understands the purpose of the agreement and any specific requirements.
Make any changes suggested by the attorney to the agreement.
Make sure that any changes are drafted in plain language and are easy to understand.

Once you have the agreement reviewed by legal counsel, you can be confident that it is legally compliant and ready for implementation.

Discuss how to ensure compliance with applicable laws

Research and understand the applicable laws and regulations related to employee confidentiality in the jurisdiction where the company operates
Identify any potential legal requirements that need to be met
Discuss the legal requirements with legal counsel
Implement necessary changes to the agreement to ensure compliance

Once you have discussed the legal requirements with legal counsel and implemented necessary changes to the agreement, you can check this step off your list and move on to the next step.

Understand the legal requirements

Research applicable laws related to confidentiality in the workplace
Understand your company’s policies related to employee confidentiality
Identify any applicable state or federal regulations that might apply to your company
When you have a good understanding of the legal requirements, you can move on to the next step.

Follow compliance guidelines

Research applicable state or federal laws and regulations that apply to your business
Ensure the agreement satisfies all compliance requirements
Check the agreement with an attorney to ensure its legality
Review the agreement with Human Resources to ensure it meets their standards
When all compliance guidelines have been met, the agreement is ready to be finalized and used with employees.

Train employees on the agreement

Schedule a training session on confidentiality guidelines and the employee confidentiality agreement
Create a training presentation that outlines the purpose of the agreement, the provisions of the agreement, and penalties for non-compliance
Ensure that all employees attend the training session and sign off on their understanding of the agreement
Keep copies of signed agreements on file
When all employees have signed and agreed to the employee confidentiality agreement, you can check this off your list and move on to the next step.

Provide advice on how to handle potential disputes over employee confidentiality agreements

Take any disputes very seriously and document any conversations or meetings concerning the agreement
Consult with a lawyer to ensure that any dispute is handled according to legal protocol
Establish clear disciplinary procedures for any breach of confidentiality
Encourage employees to bring up any concerns they have about the agreement and address them in a timely manner
Make sure that employees understand the terms of the agreement and that they are aware of the consequences of not following it

Once you have discussed the agreement with all employees and informed them of the potential repercussions for breaking it, you can check off this step and move on to the next one.

Encourage employees to follow the agreement

Develop a system to ensure employees are aware of the agreement, such as providing a copy to each employee who signs.
Implement an employee training session on the terms and conditions of the confidentiality agreement to ensure they understand the importance of keeping the agreement.
Provide employees with a copy of the signed agreement upon hire.
Create a reminder system for employees to remind them of their obligations, such as annual emails.
Monitor employees’ compliance with the agreement and respond promptly to any violations.

When you can check this off your list and move on to the next step:

Once you have developed a system to ensure employees are aware of the agreement, implemented an employee training session, provided employees with a copy of the signed agreement, created a reminder system for employees, and monitored employees’ compliance with the agreement, you can check this off your list and move on to the next step.

Handle non-compliance promptly

Identify the specific action that constitutes non-compliance with the agreement
Establish a process for employees to report any potential violations
Establish a system for tracking instances of non-compliance
Develop a process for addressing and resolving instances of non-compliance
Implement disciplinary measures, such as suspensions or terminations, for employees who persistently disregard the agreement
Ensure that any action taken is consistent and fair
Document every instance of non-compliance and the outcome of any disciplinary action

You’ll know when you can check this off your list and move on to the next step when you have identified the specific action that constitutes non-compliance with the agreement, established a process for employees to report any potential violations, established a system for tracking instances of non-compliance, developed a process for addressing and resolving instances of non-compliance, implemented disciplinary measures, and documented every instance of non-compliance and the outcome of any disciplinary action.

Actively monitor the agreement

Regularly check in with employees to ensure they understand the agreement and are abiding by it
Set up a system to alert you of any changes to the agreement terms
Monitor employee behavior to ensure they are not sharing confidential information outside of the agreement
Check in with the legal team to ensure any changes to the agreement are still compliant with the law
When you feel confident that the agreement is being followed, you can move on to the next step.

Seek legal guidance

Consult with a lawyer to determine what should be included in the agreement
Make sure the agreement includes all relevant points and complies with all applicable laws
Have the lawyer review the agreement to ensure it is legally binding
Once the lawyer has reviewed the agreement and any changes have been made, you can move on to the next step.

Explain how to modify an existing employee confidentiality agreement

• Read through the existing employee confidentiality agreement and identify any areas that need to be changed.
• Make a list of the changes that need to be made, and be sure to note why they need to be changed.
• Make sure to take into account any changes to the law, or any new information that needs to be included in the agreement.
• Make any necessary changes to the agreement, and be sure to double-check that the changes are accurate.
• Once you are satisfied with the changes, you can save the document and move on to the next step.

You will know that you can check this step off your list when the new employee confidentiality agreement is accurate and up-to-date.

Understand the original agreement

Read through the existing employee confidentiality agreement
Familiarize yourself with all the sections, clauses and definitions in the agreement
Make notes and highlight important sections, clauses and definitions
Once you have a full understanding of the agreement, you can move on to the next step of drafting a new agreement

Draft a new agreement

Write a draft of the agreement that reflects the desired changes
Identify the parties involved in the agreement, the scope of the agreement, the obligations of the parties, and any other relevant information
Ensure the agreement meets all applicable legal and regulatory requirements
When the draft is complete, you’ll be able to move on to the next step of having the new agreement reviewed by legal counsel

Have the new agreement reviewed by legal counsel

Identify and contact a lawyer or legal counsel who is knowledgeable in employment laws and regulations.
Send the drafted agreement to the legal counsel for review.
Discuss any necessary edits or changes to the agreement with the legal counsel.
Make changes and adjustments to the agreement as recommended by the legal counsel.
When the agreement is finalized, get a copy of the revised agreement signed by both the employer and the legal counsel.

You can check this step off your list when the revised agreement is signed by both the employer and the legal counsel.

Offer tips for communicating the agreement to employees

Schedule an employee meeting to discuss the agreement and answer any questions
Send out an email to all employees detailing the agreement and encouraging them to ask any questions
Post an informational flyer in the break room outlining the agreement
Make the agreement available electronically for employees to review at their own convenience

Once you have taken the steps above to communicate the agreement to employees, you can move on to the next step.

Explain the purpose of the agreement

Explain why it’s important for both the employer and employee to have a confidentiality agreement in place
Outline the type of information that should remain confidential, such as trade secrets, customer information, etc.
Describe the consequences of violating the agreement
Clarify that the agreement is legally binding
Highlight the benefits of having a confidentiality agreement in place
Let the employee know that you take confidentiality seriously

Once you’ve explained the purpose of the agreement, you can check this step off your list and move on to the next step.

Allow for questions and feedback

Invite questions and feedback from the employees.
Make sure they understand the agreement.
Provide a timeline for feedback, if applicable.
Encourage employees to ask questions in a respectful and professional manner.
Address any questions or concerns in a timely manner.

When you can check this off your list and move on to the next step:

When all questions and feedback have been addressed and there is a general understanding of the agreement among all parties.

Emphasize employee responsibilities

Explain the importance of confidentiality to the employee.
Identify the confidential information they are expected to protect.
Explain the consequences of any breach of confidentiality.
Make sure the employee understands the importance of protecting confidential information.
Provide a copy of the agreement for the employee to keep for their records.

Once the employee has been given an explanation of the agreement and a copy of the agreement for their records, you can check this step off your list and move on to the next step.

Make sure employees understand the consequences of violating the agreement

Explain any potential legal consequences of violating the agreement, including fines and/or charges
Make sure to explain the potential financial and other penalties that may be imposed
Ensure that the employees understand that any breach of the agreement may result in their dismissal
Have employees sign an acknowledgement form to indicate that they understand the consequences of violating the agreement
Once the employees have signed the acknowledgement form and all the other steps have been completed, you can move on to the next step.

Explain the importance of enforcing the agreement

Explain the importance of employee confidentiality and trust in maintaining a positive work environment.
Describe the potential risks of not having an agreement in place.
Emphasize the need for employees to keep confidential information secure and private.
Explain the consequences of non-compliance with the agreement.

How you’ll know when you can check this off your list and move on to the next step:

The employee should understand the importance of the agreement and the consequences of non-compliance.
The employee should have a clear understanding of what is expected of them and why confidentiality is important.

Set expectations for compliance

Outline the rules and terms of the agreement to the employee
Make sure the employee understands the purpose of the agreement and the consequences for non-compliance
Emphasize the importance of the agreement and its impact on the workplace
Ensure that all relevant employees are informed of the agreement, its purpose, and their responsibilities
Make sure all employees have a copy of the agreement and understand its terms
When complete, seek a signature from the employee acknowledging their understanding of the agreement and agreement to comply
Once the agreement is signed, make sure to keep a copy for your records

How you’ll know when you can check this off your list and move on to the next step:

When all relevant employees have been informed of the agreement, its purpose, and their responsibilities
When all employees have a copy of the agreement and understand its terms
When a signed copy of the agreement has been obtained from the employee