Your company’s confidentiality agreement with its employees is not worth the paper it is printed on if it cannot be enforced. An unenforceable confidentiality agreement might even be worse than having nothing at all, since it might lull management into a sense of complacency over the security of sensitive information. But in a well-meaning effort to protect as much information as possible, some businesses try to protect too much information or protect the information for too long into the future. This can result in an overbroad confidentiality agreement, which might not be enforceable at all.
Confidentiality agreements are restrictive covenants that courts scrutinize for their reasonableness. In Virginia, courts are increasingly giving restrictive covenants more and more scrutiny. Moreover, the problem of an overbroad confidentiality agreement is exacerbated because, in Virginia, courts will likely not “blue pencil” the agreement by excising the overbroad components of the confidentiality provision and enforcing only the acceptable portions; the agreement must likely be completely acceptable or it will be entirely unenforceable.
Time and subject matter are the two most common areas of over-breadth in confidentiality agreements. A confidentiality provision should have a reasonable subject matter scope and a reasonable temporal scope. It should encompass no more and no less than the specific information that needs to be protected. Over-inclusiveness–whether it is deliberate or through sloppiness–is a cardinal sin in drafting confidentiality agreements. Business owners and management must think carefully about the particular types of information are actually confidential, and use language in the confidentiality agreement that carefully delineates that information.
Even if the substantive scope of the confidentiality agreement is narrowly tailored, it might still be deemed unenforceable if it seeks to prohibit disclosure of the information in perpetuity. Courts tend to look at information on a sliding scale of importance, and allow greater temporal restrictions depending on the importance of the information. But when marginally confidential information is tied with an in perpetuity prohibition on disclosures, Virginia courts will tend to draw the line and deem the entire confidentiality agreement unenforceable.
Having an overbroad confidentiality agreement is just as bad as not having one at all. Unfortunately, many businesses do not find out that their confidentiality provisions are worthless until they really need to enforce them. In Virginia, the law has changed substantially in the past five years, such that a confidentiality agreement that may have passed muster five years ago might be worthless today. The difference between a good and bad confidentiality agreement is often as simple as the addition or subtraction of a few words. Giving your company’s confidentiality agreement a check-up can prevent headaches down the road.