Confidentiality Clauses: Things You Need to Know

Many people make the mistake of thinking language requiring them to keep an agreement confidential is simply boilerplate language in a contract and they fail to take it seriously. However, this type of provision should be read and understood before you sign a contract because it can come back and bit you if you breach its terms.

The requirement that you keep the existence of the agreement confidential is different from the obligation to keep your employer’s proprietary information confidential. Keeping trade secrets or other private business information confidential is an “implied duty of loyalty,” which most employees understand. However, the clause requiring you to keep the existence of the agreement a secret means that you cannot reveal the terms of the contract to anyone, unless exceptions are listed. If you breach this provision, it can be very costly to you.

The most common exceptions listed in an agreement not to reveal the existence of the contract are the ability for you to share it with your lawyer, your financial advisor, and your spouse. If you are presented with a contract containing this provision and no exceptions are listed, you should request for them to be added. In fact, you may also want to request additional exceptions be made, such as the ability to reveal the contract with taxing authorities or other legal authorities if they request to see it.

If the other party to the agreement is reluctant to add the listed exceptions, consider adding the requirement for the parties that you can share the contract with be required to be bound by confidentiality too. In most cases, it is not necessary to get their agreement to keep the contract terms confidential in writing because it is implied by their role as an attorney or financial advisor anyway.

Finally, remember that the main reason these provisions are included in contracts is employers do not want employees comparing compensation, severance, or retention packages with each other. Keep the critical information quiet and you likely will have no issue. But, on the flip side, if you go bragging to co-employees about how much compensation you were able to negotiate, you will likely hear from your employer’s attorney.

If you are involved in a breach of contract claim or have questions regarding an agreement you are being asked to sign, let us help. Contact our office today to schedule an appointment with one of our knowledgeable attorneys. We can help make sure you obtain the best possible outcome in your case.