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Confidentiality Agreements Should be Reasonable Too

  • Summer 2003

    Most employers are aware that, to be enforceable, non-competition agreements that restrict an employee's post-employment activities must be reasonably limited in time and geographic scope, as well as in the nature of the restrictions imposed, so that former employees are not unreasonably restricted from pursuing their occupations and livelihoods. When employers seek to protect their confidential business information by using confidentiality agreements, however, they often insist on wording such agreements very broadly to try to ensure that all possible confidential information is protected from disclosure and use by former employees. In doing so, employers may not realize that they can jeopardize the enforceability of their confidentiality agreements.

    Courts have held that broadly worded confidentiality agreements can be subjected to the same scrutiny as non-competition agreements, and can be declared unenforceable, if they substantially limit an employee's post-employment competitive activities. When employees leave their jobs, they are generally entitled to take with them and use the skills and general knowledge they either acquired or increased during their employment. If confidentiality agreements are worded so expansively that former employees are prohibited from using or disclosing much of the information that was disclosed to them during their employment, courts have held that such agreements can amount to unreasonable restraints on trade that are void because their effect is to lessen competition.

    Indeed, some courts have even held that confidentiality agreements must contain both chronological and geographical limitations that are reasonable in order to be enforceable. As a result, employers would be well-advised to review their confidentiality agreements to make sure that the information which they seek to protect is in fact confidential, and that the limitations imposed are reasonable and necessary for the protection of legitimate interests of the employers.

Confidentiality Agreements Should be Reasonable Too

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