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Posted on 03.06.2014

Honoring Confidentiality Agreements: The Price of Failure

Facebook is an excellent way to get a message out to 1,200 friends fast - just make sure it's a message you want public! Patrick Snay told his daughter about a court-approved $80,000 settlement he won against a former employer for age discrimination. Unfortunately for him, he was not allowed to do that according to the confidentiality agreement attached to the settlement. What would be the harm in telling his daughter?  No one, of course, would know about the private conversations of a family. Mr. Snay's daughter, however, decided this exciting information was worthy of mention on her Facebook page for the 1,200 friends who follow her. This public news travelled very quickly back to the former employer, and they argued that now they didn't owe Mr. Snay his settlement. The Third District Court of Appeal for the State of Florida agreed.

While this particular situation refers to a court situation around a personal issue, confidentiality agreements and non-disclosure agreements (NDAs) are a routine part of the business environment as well. They protect companies from having proprietary trade secrets, unique internal operations, and privileged corporate information released to the public by advisors, consultants and business partners or contacts. Because NDAs are so routine, we often forget how important, and legally enforceable, they are. As in Mr. Snay's situation, it can be tempting for individuals to share interesting - and even more often, not-so-interesting - tidbits with people we think will keep the very secret that we were entrusted from sharing with anyone.

As innocent and harmless as this may seem, sensitive information has an innocuous way of travelling that can be very big news when it finds its way to the right person - such as a business competitor or a reporter, and this can have dire consequences for the company whose secrets we promised to protect.

When companies ask us to sign confidentiality agreements, they do so for a reason. Along with competitive and industry considerations, companies have significant regulatory burdens. The disclosure of sensitive information can lead to regulatory intervention and oversight that can delay meaningful corporate activities such as IPOs, acquisitions, product development, or market expansion. The financial consequences and legal implications to the company in these situations can be drastic.

Once the NDA is signed, the signer has a moral and ethical duty to respect the professional integrity of non-disclosure. The NDA is a statement of trust. By honoring the NDA, you create a productive environment that encourages the free flow of information and interactivity that benefits everyone involved, and this trust enables businesses to grow. With confidence in the NDA, both businesses and their advisors can contribute fully and productively to maximize the successful outcome of the corporate project.


Perry Hall was a Senior Account Supervisor at Lovell Communications. You can view more of Perry's blogs here 

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