Have Employees Sign Confidentiality Agreements on Day 1

Posted by Jeffrey N. Berman on

We just closed an M&A transaction in which we represented the selling shareholders. The company has substantial intellectual property but failed to have its employees sign confidentiality agreements.  As expected, the buyer wanted each employee to sign such an agreement. To accomplish this, the selling shareholders had to pay employees as an incentive to sign the confidentiality agreements. Had the company required the employees to sign confidentiality agreements at the start of the employment, the selling shareholders would have avoided significant frustration and saved substantial money. The lesson is to have employees sign confidentiality agreements at the inception of employment.