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Under any type of employment agreement, including a consulting agreement, confidential information may be disclosed by the employer. Such confidential information may include any information not known to the public that if disclosed could adversely affect the employer’s business, including information such as:
- Trade Secrets
- Customer lists
- Intellectual property
- Sales, makering, or litigation strategies
Employers interested in maintaining confidentiality over such topics should include an equitable (injunctive) relief clause in their employment/confidentiality agreements.
In an equitable relief clause, the consultant (receiving party, i.e., party receiving the confidential information) acknowledges that money damages may be an insufficient remedy and that the employer (disclosing party) should be entitled to injunctive or other equitable relief for any breach of the confidentiality provisions.
Courts will not grant equitable remedies, such as Specific Performance or injunctions, where monetary damages can afford complete legal relief. An equitable remedy interferes much more with the defendant's freedom of action than an order directing the defendant to pay for the harm he or she has caused, and it is much more difficult for a court to supervise and enforce judgments giving some relief other than money. Courts, therefore, will compensate an injured party whenever possible with monetary damages; this remedy has been called the remedy at law since the days when courts of Equity and courts at law were different.
If confidentiality is broken and such information is disclosed by the consultant, the employer would likely be more interested in preventing further disclosure than receiving money damages. Therefore many consulting agreements contain a clause where the consultant agrees that he or she waives the right to claim that the employer can be adequately compensated by money damages (has an adequate remedy at law) for the harm caused by the consultant disclosing the confidential information.
It is best to list out the available and prohibited remedies so that in the event of a breach, the parties can be certain of their options for relief.
- Expert acknowledges that the unauthorized use or disclosure of the Confidential Information will cause irreparable harm and significant commercial damages to the Employer, the extent of which will be impossible to measure in money. Therefore, if the Employer should institute any action or bring any proceeding under this Agreement, Expert hereby waives the claim or defense that the Employer has an adequate remedy at law.
- In the event Consultant shall violate or threaten to violate the confidentiality provisions of this Agreement, damages at law will be an insufficient remedy and the Employer shall be entitled to equitable relief including but not limited to injunction, monetary damages, punitive damages, and specific liquidated damages in the amount of $[amount of damages] for disclosure of confidential information and use of such information to solicit company's customers. In addition, other remedies or rights available to the Employer and no bond or security will be required in connection with such equitable relief.
- Employer will be free to seek equitable relief for any breach by the Expert of the confidentiality obligations of this Agreement.
- Consultant acknowledges and agrees that due to the unique nature of the Confidential Information, any breach of this agreement would cause irreparable harm to Employer for which damages are not an adequate remedy and that Employer shall therefore be entitled to equitable relief in addition to all other remedies available at law, except for consequential or special damages.
- Expert covenants and agrees that if it shall violate any of the covenants of this Agreement, Employer shall be entitled to an accounting and repayments of all profits, compensation, commission, remuneration, or other benefits Employer directly or indirectly had realized and may realize as a result of, growing out of, or in connection with any such violation. Furthermore, in the event of a breach or threatened breach by Expert of any of the provisions of this Agreement, Employer, in addition to, and not in limitation of, any other rights, remedies or damages available to Employer at law or in equity, shall be entitled to a permanent injunction in order to prevent or restrain any such breach by Expert or by Expert’s partners, agents, representatives, servants, employers, employees and any and all persons directly or indirectly acting for or with him or her.
This article is part of the blog series Improving Your Expert Consulting Agreement.