What are the key elements that should be included in a Confidential Information Release Agreement?

I am a business owner and I have recently hired a new employee who will have access to sensitive and confidential information. I want to ensure that this information remains protected, so I am in the process of drafting a Confidential Information Release Agreement. I am seeking guidance on the essential elements that should be included in this agreement to effectively safeguard my company's confidential information and prevent any potential misuse or unauthorized disclosure by the employee.

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When you’re hiring an employee who will have access to sensitive business information, a well-drafted Confidential Information Release Agreement (often structured as a Non-Disclosure Agreement or NDA) is one of the strongest safeguards you can put in place. The enforceability of the agreement depends on how precisely it’s written, so each section should be thought through carefully. Definition of Confidential Information The agreement needs a definition that’s broad enough to cover your key assets but specific enough that a court will enforce it. A good approach is to use examples followed by a catch-all phrase. For example, you might list customer lists, financial records, pricing models, marketing plans, source code, prototypes, supplier agreements, and employee data, and then add a general clause covering “any other information, whether written, oral, or electronic, that is not generally known to the public and provides the company with a competitive advantage.” Many agreements also provide that information is confidential if it’s marked as such or if a reasonable person would recognize it as confidential under the circumstances. Employee Obligations The employee’s duties should be spelled out in plain terms. They must not disclose the information to anyone outside the company without written approval. They should only use the information as needed to perform their job and for the benefit of the company. They also need to take reasonable precautions to protect the information, such as safeguarding passwords, not discussing matters in public places, and securing documents just as they would their own personal records. Exclusions from Confidentiality An agreement that doesn’t carve out reasonable exclusions is more likely to be struck down. Standard exceptions include information that is already public, information the employee had before joining the company, information developed independently without relying on the company’s resources, information legitimately obtained from another source, and disclosures that are required by law or court order. If disclosure is legally required, the employee should be obligated to give the company prompt notice so it has a chance to intervene. Duration of Obligation The confidentiality period depends on the nature of the information. For trade secrets, the obligation should last as long as the information qualifies as a trade secret. For other sensitive but non-secret information, it’s common to set a post-employment period of two to five years. Courts tend to find these durations reasonable. Return or Destruction of Information When employment ends, the agreement should require the employee to return or destroy all materials containing confidential information, whether in paper or digital form. It’s also wise to require the employee to confirm in writing that they’ve returned or deleted all copies, including notes and stored electronic files. Remedies for Breach To protect your position in the event of a violation, include provisions for injunctive relief, damages, and attorney’s fees. Injunctive relief allows you to seek a court order stopping the misuse immediately, without waiting for a damages trial. Attorney’s fee provisions are enforceable in many jurisdictions and can deter breaches, though you’ll want to confirm enforceability under your state’s law. Whistleblower Immunity Notice Federal law requires that you include specific language from the Defend Trade Secrets Act of 2016. This notice protects employees from liability if they disclose a trade secret in confidence to a government official or attorney for the purpose of reporting or investigating suspected legal violations. If you leave this out, you lose the ability to seek exemplary damages or attorney’s fees in a federal trade secret case against that employee. General Provisions Rounding out the agreement with standard contract clauses improves enforceability. Common provisions include governing law (which state’s law applies), severability (invalidating one clause doesn’t void the entire agreement), no waiver (failure to enforce once doesn’t waive rights later), and entire agreement (confirming that the NDA overrides prior understandings about confidentiality). Get Professional Help Protecting Your Business Protecting confidential information is vital when hiring new employees, and the strength of your agreement depends on getting the details right. The business attorneys on Contracts Counsel are available to draft, review, and tailor your confidentiality agreement so it’s enforceable in your state and aligned with your company’s needs.