Limitations of Confidentiality Agreements

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Limitations of Confidentiality Agreements

To protect information that is crucial to the continued success of a business, an employer may require that some or all employees sign a confidentiality agreement, particularly if they are managerial or professional employees. These agreements typically prohibit an employee from disclosing the employer’s confidential information to another individual or to the public in general.

The goal of a confidentiality agreement is to prevent the employee from leaving his or her position and providing an unfair advantage to a competing business by using the employer’s confidential information. To be enforceable, confidentiality agreements should:

  • Spell out the types of information the company considers confidential;
  • The requirement for employees to keep such information confidential both during employment as well as beyond termination or departure;
  • The requirement for employees to surrender all confidential information upon termination or departure;
  • Notice that the company is entitled to specific legal remedies if the confidentiality agreement is breached;
  • A statement to the effect that the confidentiality agreement has no bearing on an employee’s at-will status.

Under Arizona law, trade secrets are a legitimate protectable interest that an employer can include in a confidentiality agreement signed by an employee. In addition, if customer information is truly confidential and inaccessible to the public, then an employer may address it in a confidentiality agreement.

However, employers may not use a confidentiality agreement to prohibit employees from reporting illegal activities, and whistleblower laws protect employees from being fired or disciplined for reporting violations.

So long as the restrictions in the agreement are not overbroad or unreasonable, Arizona courts are likely to enforce confidentiality agreements. If there is a breach of a legally valid confidentiality agreement by an employee, the business could have a claim under the Arizona Uniform Trade Secrets Act, as well as other claims.

When employment disputes arise, you need experienced legal representation and advice. Williams Commercial Law Group, L.L.P., is a law firm focusing on contract disputes and business divorce. Contact us at (602) 256-9400 and schedule a time to meet with us today.

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