A New Jersey district court recently held that an employee handbook provision could not be enforced as a valid confidentiality agreement between a company and a former employee.  Metropolitan Foods, Inc. d/b/a Driscoll Foods v. Kelsch [pdf] involved a former employee of Driscoll Foods (Kelsch), who was accused of soliciting orders for his new employer while still working for Driscoll.  Driscoll sued Kelsch under a number of causes of action, including breach of contract.  This claim was based upon a provision in the Driscoll employee handbook which stated that employees may “not disclose to unauthorized persons, including subsequent employers, Driscoll Foods’ confidential information.”

Usually, it is a plaintiff-employee replying upon an employee handbook as a basis for suing an employer for breach of contract, e.g., the employer did not follow proper procedures in the handbook when discharging the employee.  Woolley v. Hoffman-LaRoche, Inc., 99 N.J. 284 (1985).  In this case, the employer tried to use the provisions of the handbook as a basis to sue the employee.

However, as with most handbooks that were drafted with the advice of counsel, the Driscoll handbook was “rife with” disclaimers and statements that the handbook was “not a contract.”  Therefore, while Driscoll had other valid causes of action to sue Kelsch, namely, breach of the duty of loyalty, the court held that the handbook provision concerning confidentiality could not be enforced as a valid contractual provision.

Employers with concerns about employee access to their confidential information can avoid this result by having employees sign a short confidentiality agreement apart from the employee handbook.  Such an agreement puts the employee on notice that he or she will be using confidential information in the course of his or her employment, and that the company expects the employee to protect such information.  Employers should consider including the following in confidentiality agreements:

• a definition of confidential information;
• a commitment by the employee to keep such information in absolute confidence;
• a provision stating that the agreement survives the termination of employment (unless the information becomes part of the public domain);
• a provision providing that the company shall be entitled to all remedies, including injunctive relief, for breach of the agreement; 
• a provision providing that the employee shall return all confidential information upon termination of employment; and
• a provision stating that the agreement does not change the employee’s at-will status.