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Generics? For Drugs, Maybe, But Not for Restrictive Covenants

If employers are serious about protecting their confidential information, they should stop using generic form agreements to protect that information.

Too often, I come across employers who are using non-disclosure agreements that appear to have been downloaded from some human resources group’s website. The generic definitions used in those agreements do little to inform employees what their employer considers so important that they should not tell anyone else about it. If the goal is to make sure the employees protect the employer’s information, these agreements should—at a minimum—describe with some specificity the information the employer is trying to protect. After all, if employees don’t understand an agreement, it will be very difficult for them to comply with it.

Additionally, relying solely on non-disclosure agreements may not be enough. If an employer has information that it needs to protect, it should take concrete steps to make sure that only those employees with a need to know about that information have access to it. It may be hard to argue that something is confidential when it is widely disseminated throughout your organization. This raises the question of whether an employer should require non-disclosure agreements from those employees who are not supposed to have access to certain types of confidential information. If an employer is concerned about information that might be accidentally disclosed to a lower level employee, the disclosure agreement should probably state that the employer does not intend to share certain information with that employee; however, if the employee obtains it by accident—someone left something on a copy machine—then he will have a duty not to disclose it. Not indicating the employer’s expectations in this circumstance and instead using the same generic definition of confidential information for all employees tends to cause doubt that the employer is doing anything to protect its information. That’s never a good thing if you need to get a court to enforce your agreement, where the court will be asking whether your confidential information was confidential.

This need to tailor non-disclosure agreements to the employees’ circumstances is even more important for employers with unionized workforces. Remember that unions have the right to request information related to bargaining matters and discipline. If an employer tries to implement an across-the-board non-disclosure agreement for all employees, including those represented by unions, don’t be surprised if the union asks for details on what confidential information the employer is trying to protect. Additionally, don’t assume that the agreement will be enforceable with respect to the union employees. The United States Court of Appeals for the District of Columbia recently rejected an employer’s claim that it was permissible to roll out its non-disclosure forms without union approval because the union had waived the obligation to bargain for the non-disclosure agreement. Because the collective bargaining agreement did not address many of the issues raised in the non-disclosure agreement, the D.C. Circuit Court told the employer it could not enforce these non-disclosure agreements with respect to its unionized employees.

A careful process that allows an employer to consider the specifics of what it is trying to protect and the circumstances of particular employees will lead to better use of non-disclosure agreements and will help avoid some of the common pitfalls I’ve seen over the years. Failure to follow such processes can lead to non-disclosure agreements that are not worth the paper they are written on and years of litigation that does nothing to protect the employer’s confidential information.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.