Originally posted: April 12, 2019 -- Updated: 11-17-2021

Confidentiality agreements or non-disclosure agreements are a great way to ensure your business practices, client information, and other sensitive information is kept confidential. However, Non-disclosure agreements (NDAs) must meet specific standards by law.

Illinois’s Workplace Transparency Act added additional requirements for employers who choose to use confidentiality provisions in their employee contracts. In 2021, employers are prohibited from employee contract provisions that are:

Business owners often use non-compete agreements to protect their brand and trade secrets. Previously reserved for high-level executives, these contracts have even made their way into the “lower-income” sector. However, state law prohibits the use of non-compete agreements in some situations. Furthermore, such agreements must meet certain criteria to be considered enforceable by the courts. Where does your company stand on its use of “covenants not to compete?” The answer may surprise you. 

What is a Non-Compete Agreement? 

While non-compete agreements are not stand-alone documents, they do frequently make an appearance in other types of contracts, such as employment agreements and contracts for the sale or purchase of a business. Used to protect things like a company’s trade secrets, marketing tactics, client or customer data, and other sensitive business information, they prohibit the signer from working in a specific industry, trade, or geographical location. It may also prohibit the singer from working with specific competitors (prospective employers). 

If you are running a business and have a product or service that isn't offered elsewhere or is relatively unique, chances are you have considered a confidentially agreement. All businesses operating in an industry in which secret formulas or recipes could compromise the ability of the business to make a profit should have a confidentiality agreement in place with employees. It is best that this agreement is considered and signed before an employee begins work in earnest — any hesitation can lead to murky legal waters regarding the divulgence of company-specific products or services.

The reason that confidentiality agreements need to exist separation from patents or copyrights is because they, in large part, protect trade secrets. The difference between trade secrets and copyrighted products or processes is that a trade secret is considered intellectual property. Confidentiality agreements are implemented in addition to the protections afforded by copyright infringement laws, however, because trade secrets are intellectual property that is considered non-public. Laws regarding intellectual property are complicated to enforce and often confusing for both parties involved. Confidentiality agreements allow for some of this complication to be ironed out.

The importance of such agreements cannot be overstated. It is estimated that the theft of trade secrets costs the American economy billions of dollars annually. There are federal criminal laws, in large part monitored and enforced by the Federal Bureau of Investigation, to combat and punish such theft, but because of the wide scope of incident and the myriad of red tape that must be cut in order to prosecute such cases, these incidents are often best left to be handled by the parties involved. This is where confidentiality agreements come into play.