As the business world has turned increasingly tech-savvy, more and more employees—even run-of-the-mill support staff—are exposed to what businesses consider “confidential, proprietary, or trade secrets.” To protect the business, many employers have been advised by their attorneys to require employees to sign confidentiality agreements at the time of being hired by the business. And many of these employers turn to template or boiler-plate filled agreements to accomplish this task on the cheap.
However, an employer must customize the definition of “confidential information” in their agreement. The customization should reflect the nature of its industry, business, and the information. If the employer values a certain category of information and intends to protect it from disclosure—or independent use by the employee—then it should be included in the definition of confidential information.
The first step up would be to create a laundry list of protected information, provide “the list is not exhaustive,” and include this list as an addendum to the agreement. However, the next level up would be to actually narrowly tailor the list of confidential information to the employer’s legitimate business needs and the employees actual exposure. In tailoring the list, the employer should identify the legitimate information that gives the employer an advantage (i.e. unique, distinctive, brand, etc.) and that which would harm the employer if exposed. Such a narrowly tailored list is more likely to be considered reasonable and therefore enforceable by a court interpreting the agreement (whether under state or federal law).
For example, an overly broad confidentiality agreement could potentially be found to constitute an unlawful non-competition covenant, and if so, be in violation of Section 16600 of the California Business & Professions Code . If an agreement violates Section 16600, there is a risk that it will constitute unfair competition in violation of Section 17200 of the California Business & Professions Code and California public policy (see Application Group, Inc. v. Hunter Group (1998) 61 Cal.App.4th 881). And if an employee is terminated for refusing to sign such an agreement, the employee may have a tort claim for wrongful termination in violation of public policy (Walia v. Aetna (2001) 93 Cal.App.4th 1213, review granted and dismissed).
A narrowly tailored confidentiality agreement also helps meet the employer’s initial burden to satisfy the second prong of the definition of a trade secret under California law. So, employers should specify why it is necessary to keep the protected information confidential.