New businesses may struggle to keep their innovation a secret. In addition, key employees leaving the company may cause a lot of harm if they start working with a competitor. Even worse, a former employee may start competing business and undercut his or her former employer with cheaper prices and/or better service. How to tackle these issues effectively?
It is important to note that confidentiality agreements (otherwise known as NDAs) and non-compete agreements address different issues. While NDAs prevent employees from giving away the company’s marketing strategy at the bar, these agreements do not prevent employees from seeking additional employment (even with a competitor). On the other hand, non-compete agreements prohibit employees from seeking additional employment but do not forbid the disclosure of confidential information. One caveat: the employer must pay compensation of 40% of the employee’s average monthly salary for each month the employee is prohibited from competing, while a confidentiality obligation requires no additional compensation. A lot of companies opt to conclude NDAs with their employees, however conclusion of both agreements could be a winning strategy in some cases.
Create a list
An NDA is worthless if employees do not know what information is considered confidential. Unfortunately, a provision indicating that all information is confidential will not stand a chance in court. For this reason, confidential information, commercial secrets, and other types of sensitive information should be identified by drawing up a list. This way, in the event of a dispute, the employee will have a hard time proving that he or she did not know a particular type of information was confidential.
Let employees know
Did you know that 90% of claims fall apart because a signature was missing? The golden rule when introducing any policies or agreements to the employees is to actually take the time to explain their significance and get the employee’s signature (or at least email confirmation). This way it will be clear that the employees have read the documents and understood their content.
It is a common misconception that once agreements are signed and policies are introduced, the job is done. This is far from the truth. Do not let your NDAs and non-compete agreements gather dust in a drawer: remind the employees of their content once in a while. The company’s culture plays a huge part in employees’ behaviour and if they see that little significance is given these agreements, they will be more likely to breach them.
Sometimes clients ask ‘But how do I know if there was a breach of an NDA or a non-compete agreement?’ A breach can be detected only by being alert to the behaviour of employees while they are working in the company and by monitoring their professional lives once they leave the company. It is important not to cross boundaries of personal data protection, however, taking a look at their public social media posts can be a good indicator whether they are working with a competitor.