4 Ways Businesses Can Maintain Confidentiality in the Workplace
Last Updated: March 05, 2024
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Key Takeaways:
- Employees often pose the biggest risk to company confidentiality.
- Companies can protect sensitive information by including a confidentiality clause in employee and contractor contracts.
- Businesses should use Non-Disclosure Agreements (NDAs) or Confidentiality Agreements, to safeguard sensitive information.
Businesses benefit from keeping certain information private. For example, some types of intellectual property are valuable because of their confidential nature.
In business, intellectual property (IP) often refers to software, inventions, exclusive products, processes for manufacturing products, and more.
Although it’s important, intellectual property isn’t the only type of information that should be kept confidential. In the workplace, confidential information is often, but not always, represented in physical or digital documents and can include:
- Employee and customer information, such as home addresses, telephone numbers, email addresses, usernames, passwords, driver’s license numbers, financial information, tax information, medical information, and Social Insurance Numbers.
- Proprietary information and trade secrets that give a company a competitive edge, including processes, client lists, supplier lists, financial data, product plans, marketing strategies, research findings, recipes, and Business Plans.
- Sensitive company information, such as employee misconduct information, employee disciplinary records, salary negotiations, and planned layoffs.
Employees often pose the biggest risk to company confidentiality. When employees have access to private information or documents, they could intentionally or unintentionally share ideas and other private information. Thankfully, there are ways to mitigate this risk.
In this article, we’ll discuss four proactive ways businesses can protect themselves and ensure confidentiality in the workplace.
Add confidentiality clauses to contracts
One of the best ways companies protect sensitive information is by including a confidentiality clause in certain contracts. The most obvious contract that often contains such a clause is an Employment Contract.
Employees can pose a large threat to company confidentiality. When they have access to private business information, they could divulge it to competitors or the general public at any time.
By having employees sign contracts with a confidentiality clause, they become legally bound to keep specific company information private. In an Employment Contract, it’s critical to define what is considered confidential information to eliminate misunderstandings and ensure the contract is enforceable.
In addition to hiring employees, companies often hire contractors, such as consultants and freelancers, to provide services that require specific skills or knowledge. For example, a company may hire a freelancing web developer, graphic designer, or analyst for a specific project.
Legally, contractors differ from employees and therefore require different contracts instead of an Employment Agreement, such as one of the following:
Generally, including confidentiality terms in these types of contracts is always a good idea. It’s vital if the contractor will have direct access to sensitive content, such as a company’s finances.
Whether hiring an employee or contractor, including a confidentiality clause in the job contract is the best way to lower risk and prevent any disclosure of materials to competitors or the public.
Use Non-Disclosure Agreements (NDAs) or Confidentiality Agreements
Including a confidentiality clause in an employee or contractor’s agreement should provide businesses with adequate protection. Still, when hiring, managing, and promoting people, businesses can always use an additional protective document, such as a Non-Disclosure Agreement (NDA) or Confidentiality Agreement, to further safeguard sensitive information.
These agreements require buyers to keep the information they learn during negotiations private. They also outline the repercussions of breaching confidentiality.
Besides employees and contractors, businesses sometimes have to share confidential information with other external parties. Businesses can use NDAs and Confidentiality Agreements in these situations too. Let’s examine two examples:
Example #1: Selling a business
Any prospective buyer of a business will need to review confidential information such as financial accounts and customer lists before committing to the purchase. This process is known as due diligence.
The business owner’s interests may conflict with the buyer’s, as they likely won’t want to divulge sensitive information unless they are reasonably sure the sale will proceed. This problem is solved by having the prospective buyer sign a Confidentiality Agreement or NDA followed by a Letter of Intent.
By signing a Confidentiality Agreement or NDA, the buyer is bound not to share or misuse any information obtained during the transaction's due diligence and negotiation phases.
The Letter of Intent is a non-binding statement of both parties that they will negotiate in good faith toward completing the sale and purchase of the business. When negotiating is complete, the parties will agree to the final terms in a Purchase of Business Agreement.
When a business owner is selling, they may be concerned about their existing staff and customers finding out about the sale prematurely. If employees or customers find out too early or learn sensitive details about the sale, they could be thrown off guard, negatively affecting the business. Therefore, an NDA or Confidentiality Agreement could be useful.
Example #2: Seeking investments
Suppose an entrepreneur is starting a business and looking for investors. To secure investments, they may have to share their ideas, Business Plans, or trade secrets with multiple parties, some of who may not end up investing.
Sharing such things could be unnerving for an entrepreneur, as uninterested investors could share or steal ideas and information. This is why it’s essential to use an NDA or Confidentiality Agreement before disclosing anything.
Regarding inventions, it’s very similar. If an inventor hasn’t patented their invention yet and is seeking investments or having their invention evaluated, an NDA or Confidentiality Agreement can help protect their intellectual property.
Develop confidentiality training and policies
Confidentiality training should be a key component in every company’s onboarding process. Companies should discuss confidentiality with employees and consider adding it to employee handbooks and online training.
Teaching employees how to handle and dispose of sensitive material is an excellent place to start. In addition, companies should provide employees with information about confidentiality laws and the legal repercussions of violating company privacy policies.
Having confidentiality policies for employees can also be helpful.
For example, establishing a “clean desk policy” is a great idea for office-based companies. A clean desk policy requires employees to clear confidential documents from their desks and workspaces at the end of each day. It could also mean locking up documents, laptops, computer screens, and USBs when they’re not getting used.
By simply storing confidential documents properly, companies can better protect sensitive information.
Create an employee exit procedure
Businesses should create a standardized offboarding process for departing employees. This type of process should involve an exit interview, but should also outline how employees return company property and forfeit their access to confidential information.
To ensure confidentiality, the exit process should also involve disabling a departing employee’s company access. This may include disabling their email account, login information, and remote access. Doing so will protect business records and other important data.
After an employee leaves, some companies may also choose to change company-wide passwords that access sensitive company information and important software. This practice can be especially crucial if a departing employee is terminated.
Failing to disable departing employees’ accounts and change passwords can lead to security breaches that negatively affect a business. Therefore, these precautions should be taken immediately.
Having a process better ensures that employees don’t take confidential material with them, reducing the company’s exposure to security risks.
Dealing with breaches in confidentiality
Even when a business takes steps to maintain and ensure confidentiality, breaches can still take place. Therefore, it can be a good idea to create a response plan.
A response plan should address how to assess the damage or risk of a confidentiality breach and include steps to secure the information or remedy the situation. Steps may include removing information from the source, locating copies of sensitive material, and taking legal action.
Companies can plan for specific situations, such as published trade secrets or an employee divulging information to competitors. If the latter occurs, the employer would terminate the employee or remedy the situation as specified in the Employment Contract.
In a response plan, the more circumstances a company takes into account, the more prepared it will be should confidentiality violations occur.
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