By Anthony Marchese
As we highlighted in our previous post on the C.R.T.R case in federal court in Massachusetts, any company that entrusts independent contractors with proprietary information runs the risk that this information could be misused to the company’s detriment. In the absence of any agreement to the contrary, independent contractors are under no obligation under the law to safeguard such information from disclosure or to refrain from using such information for their own benefit.
As a result, it is critical that a company insist that each independent contractor contractually agree with the company to safeguard the company’s information from disclosure. Failure to secure an agreement not to disclose can even lead to a finding, as in C.R.T.R., that proprietary information, however valuable and sensitive to a company, was not held secret by the company and that trade secret protection was thus forfeited.
Companies that employ independent contractors should therefore devise an effective and binding non-disclosure agreement, and non-competition/non-circumvention agreement, and use it as standard practice when engaging a contractor. This will not only safeguard valuable information, but allow for meaningful discussions with key contractors.
This is especially true for government contractors who retain subcontractors. In the government contracting arena, failure to protect information that flows from the government ultimately to a subcontractor may even be a breach of the prime contractor’s agreement with the government.
Government contractors, and all companies that share sensitive information with contractors, would be well advised to consult legal counsel regarding the best way to put important confidentiality protections in place.