Reputation Risk Mitigation Confidentiality Agreements

Michael D. Moberly     January 20, 2014      ‘A blog where attention span really counts’. 

 There is nothing particularly new in the reality that forward looking – thinking companies, whether they be a university research-based spinoff, an SMM (small, medium multi-national) or a global Fortune 1000,  are experiencing an increasingly aggressive, and even predatorial environment insofar as securing human – intellectual capital to sustain their competitive position, growth strategies, and financial security.

To be sure, prospective candidates can be readily identified from virtual pools of global applicants.  But, a percentage of the candidates with the requisite levels of experience, knowhow, and trusted academic credentials, frequently come already wrapped in various forms of non-competes (NC’s), non-disclosure agreements (NDA’s) and various other forms of confidentiality agreements (CA’s) which have, quite wisely in most instances, become routine fixtures of employee hiring and on-boarding processes.

 Rationale for contractual safeguards is to establish boundaries…

In most instances, the rationale underlying the requisite that employees’ enter into NC’s, NDA’s and/or CA’s, is to establish ‘boundaries’ which employees are legally – contractually obligated to work within, usually for a specified period of time, insofar as safeguarding their employer’s proprietary information and/or trade secrets.

Such contracts themselves create legal obligations to privacy and compel employee signatories to keep specified information secret and secured.  Based on my own experiences and which I believe many colleagues would agree, any boundaries employees may be compelled to agree to, as a requisite to employment insofar as safeguarding proprietary information and/or trade secrets, are, in my judgment (a reasonable guesstimate) perhaps 60% proactive and 40% reactive.

That is, any form of contractual agreement that obligates employees to safeguard knowhow, i.e., theirs and others’ intellectual and structural capital related to work products, company proprietary information and trade secrets will, to be sure, inhibit a percentage of employees, perhaps as high as 60+%, from ever ‘purposefully’ divulging specified information to individuals absent a right to know.  There remain considerable unknowns in my view, about the actual permanency of such inhibiting intentions.

On the other hand, the reactive elements of CA’s are executed primarily to establish legal standing and/or provide a recourse for a victimized company to seek criminal and/or civil charges – damages against employee(s) who elect, for whatever reason, to, at some point during their employment or post-employment period to purposefully disregard the boundaries of a previously executed CA and divulge information to others, i.e., economic – competitive advantage adversaries, etc.

Admittedly, I find no satisfaction in the view that it is, at best, wishful thinking that CA’s, standing alone, absent respectful and legal monitoring, actually possess the preemptory and/or inhibitory features an uninitiated company or its legal counsel may naively presume.

Perceptions that information safeguards slow access to needed information…

Too, there is a perception, real or anecdotally imagined, that CA’s will limit or otherwise adversely affect the speed and collaborative necessities that comes from sharing and disseminating information in a timely and/or at will manner.  Those responsible for information asset (trade secret, intellectual property, proprietary/sensitive information) protection may not find this frequently espoused argument to be a particularly credible or worthy of otherwise addressing.

A relevant, but often overlooked reality relative to that the ‘contributory value’ related to an employee’s existing or future intellectual, structural, and relationship capital are indeed intangible assets, and exist as either stand alone or collaborative combinations.  That being the case, companies would find proactive prudency in, at minimum, revisiting, re-writing if necessary, and then re-executing employee’s CA’s, versus assuming its initial (one time) execution is a sufficient inhibitor for the duration of an employee’s employment.

The suggestion put forth here is, for new hires particularly, i.e., those who have been recruited for possessing specific intellectual and structural capital, presumably to advance a new, or existing (company) initiative or project should be subject to regular review.  The rationale is, seldom does an employees’ intellectual and structural capital remain stationary relative to its contributory value.  Instead, in most instances, such intangible (intellectual) assets will likely elevate and expand, that is their ‘contributory value’ will heighten and, as such, become increasingly attractive commodities to economic – competitive advantage (predatorial) adversaries globally.

In-coming employee’s confidentiality agreements need to be thoroughly unraveled…

That’s due, in part to (a.) the duration, (b.) what’s covered in an employee’s former employers’ CA, and (c.) whether there may be multiple – overlapping features.   Thus, it’s essential to unravel and assess these agreements insofar as their relevance to – immediate impact on the hiring company, and the employee’s ability to make immediate contributions.  In other words, be able to legally navigate such agreements to avoid, among other things, incurring extraordinarily embarrassing and costly reputation risks.

Also, in today’s HR sensitive environment, any cultural, legal, and/or religious contexts embedded in a NC, NDA, and/or CA which could conceivably hamper and/or delay a new hires’ eventual contributory value must be respectfully assessed.

To be sure, there some instances in which new hires have either been purposefully or inadvertently remiss in fully understanding specifics contained in NC’s, NDA’s, and/or CA’s executed with former employers.  On the other hand, some employees pay little or no attention to the language in employment (contractual) agreements or perhaps don’t fully comprehend the legal boundaries which their signed agreement (language) actually stipulates –  imposes on them for the duration of their employment, not to mention periods of time following their employment with a particular employer.

Collectively speaking then, the time and attention devoted to unraveling and assessing prospective hires’ previous employment confidentiality agreements can (a.) help mitigate reputation risks, (b) make for more informed hiring decisions, (c.) reduce the probability that potentially problematic employees will be inadvertently hired, and (d.) create costly and long term reputation risks.

Being on the receiving end of an allegation of violating a non-compete and/or a cease and desist letter can certainly diminish – undermine the contributory value of not only a new hire, but a company’s overall reputation.

Ultimately, the long held adage ‘ignorance is bliss’ in these circumstances is virtually irrelevant in today’s virtual and global recruitment and hiring environment.  So, the onus is on every employer, throughout their respective (new hire) on-boarding processes, to not just inquire, but bring absolute clarity to the boundaries of any and all employment agreements that may still have an effect on an employee’s reputation.

This blog post has been researched and written by me with the genuine intent it serve as a useful and respectful medium to elevate awareness and appreciation for a wide range of issues related to intangible assets within the global business community.  My posts are not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or [email protected].

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