Is Your Confidentiality Agreement Enforceable?

Many employers rely on confidentiality agreements to protect sensitive business information. But not all confidentiality provisions are created equal, and if your agreement isn’t drafted properly, it may not hold up in court. While courts tend to scrutinize non-compete clauses, confidentiality provisions are usually enforceable, provided certain legal requirements are met. Here’s what employers need to know to ensure their agreements are valid and effective.

Include the Required Whistleblower Language
Under the federal Defend Trade Secrets Act of 2016 (DTSA), employers must include a whistleblower immunity notice in any confidentiality agreement. This notice informs employees that they won’t be held liable for disclosing trade secrets in protected situations, such as reporting illegal activity or participating in a court proceeding under
seal. Failure to include this language could invalidate the agreement under federal law.

Avoid Overbroad or Unreasonable Terms
Even though confidentiality agreements are generally enforceable, they still need to be reasonable. Courts won’t uphold an agreement that’s so broad it prevents an employee from working elsewhere, especially if it starts looking more like a non-compete in disguise. A strong agreement should:

 Clearly define what information is considered confidential (i.e., proprietary, non-
public, and protected);
 Apply only to legitimate business interests; and
 Include a severability clause to protect the enforceability of the confidentiality
provision, even if another part of the agreement is struck down.

Know Your State’s Rules on Consideration
In some states, asking an employee to sign a confidentiality agreement after they’ve already started working may require offering additional compensation. For example:

 Indiana allows continued employment to count as sufficient consideration.
 Kentucky does not—meaning a separate benefit must be provided.

Employers should always check local laws to ensure they’re complying with the right requirements in the right jurisdictions.

Trade Secrets vs. Confidential Information
If a confidentiality agreement is deemed unenforceable, employers may still have some protection under state trade secret laws or the DTSA. However, these laws only apply to intellectual property that qualifies as a “trade secret,” a much narrower category than what a well-crafted confidentiality agreement can cover.

That’s why it’s so important for businesses to review and update their agreements regularly. Doing so ensures they reflect current legal standards and adequately protect all forms of sensitive information, not just trade secrets.

Contact Us
If you need assistance reviewing or drafting your confidentiality agreements, the attorneys at Bellas & Wachowski are here to help. You can reach us at (847) 823-9030 or email info@bellas-wachowski.com. Visit www.bellas-wachowski.com for more.