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The Green Sheet Online Edition

February 27, 2017 • Issue 17:02:02

Legal ease:
Secrets: A contemporary legal take

By Adam Atlas
Attorney at Law

If you have no business secrets, stop here. If you're still with me, I believe you'll find it useful to have a refresher on secrets, privacy and confidentiality in the contemporary reality. Business, being almost entirely electronic, means that more or less everything we do is documented. This is a double-edged sword.

On one hand, we can benefit because electronic breadcrumbs can protect our rights. On the other hand, our digital trails include our blunders and everything in between. However, despite the ability to record and store nearly all communications, the law of contract remains a powerful means of controlling information disclosed in business dealings.

In an article on secrets, it's tempting to get into a discussion of whether what some people call the "surveillance state" is good, bad or indifferent. I'll refrain from getting into that debate, as I don't think my contribution to that debate would change the reality for business today: namely, that all business communication is recorded. My interest is less in law enforcement and more in ordinary business recording of routine business communications. Emails, chats, phone calls, for example, are all subject to easy recording.

Is anything off the record?

Nothing is fleeting. Everything is permanent. Most documents, emails, chats, phone calls, etc., are all recorded somewhere. I am not referring to law enforcement or security services recording our every digital moment, but in ordinary business communications, it is quite easy to maintain complete records of all communication. All-in recording of calls is not uncommon in business today.

The educational piece here is for you to consider that everything you do in business communication is, in some ways, on the record. Optimists will see this as a cold shower for scheming thieves. Pessimists will see this as the end of freedom as business representatives retreat into self-censorship and paranoia.

I prefer not to pass judgment on this contemporary reality – because that is not my role. Instead, I encourage you to think about the content of your communication to be sure you are comfortable with all of it. A simple rule of thumb, for example, is to never send an email that you would not be comfortable reading on the Wall Street Journal's homepage the next day.

At the very least, you'll find this rule will tend to reduce the number of rude or insulting messages you may be tempted to send. On a more concrete level, it's not productive to create evidence that makes you look bad – regardless of whether you are truly bad.

Each nugget of digital information (that is, all of our communication) might be accessed at one point or another. Therefore, communication should be made in a manner that is consistent with intent.

For example, if you are executing on an aggressive – but legal – business plan, it does not play in your favor to pepper your communication with intentions that are more aggressive than your true intent. If you have a plan to aggressively compete against a competing business, perhaps don't say that you are going to steal their business; say instead that you are going to ferociously compete to win it.

Are confidentiality clauses useless?

No. The ready availability of data concerning all communications is entirely separate from the legal treatment of that data. A contract is the law between the parties who sign it. If a party has signed a confidentiality clause that prevents the entity from using or disclosing certain information, then the party bound by that clause has a legal duty to honor it.

The fact that information is very easy to collect, store and disclose does not decrease the effectiveness of contracts governing that information. In fact, in today's business context, there is a greater need than ever to sign confidentiality agreements and clauses.

Fortunately, the law is still very much in effect. We should not confuse the ease with which information can be stored or accessed as evidencing any lessening of the application of contracts. I recommend being more careful than ever in thinking about the information you collect, use and disclose, because it is now easier than ever to (willingly or unwillingly) breach an obligation of confidentiality.

Note, however, that distinctions exist between confidentiality, non-solicitation and non-compete clauses. Whether a clause fits one of these definitions depends not on the title of the clause, but on what the clause actually says, so read them all carefully. Here are some thumbnail definitions of such clauses:

  • <A confidentiality clause imposes a duty to not disclose a defined set of information. For example, an ISO will likely add a confidentiality clause to an agent agreement designating information concerning merchants to be the ISO's confidential information.
  • A non-solicitation clause prevents a party from soliciting a specific type of entity for a specific purpose. For example, a typical agent agreement would have a non-solicitation clause preventing the agent from soliciting other agents of the ISO.
  • A non-competition clause prevents a party from competing with another party in a defined business activity for a limited time and in a limited geography. For example, the seller for a very large ISO might agree to a non-competition clause requiring the seller to not be involved in merchant services for a year or so following closing. This kind of clause is much more restrictive than a non-solicitation clause that simply prevents the party from soliciting merchants – but might not require the person to be out of the business activity altogether.

So what's the point?

The point here is that ISOs should make sure they have in place appropriate confidentiality clauses in their agreements. However, given the ease and speed with which information travels, they should:

  • Be more careful about what information they disclose
  • Think twice about what they put in writing or chat about or talk about

I am not counselling you on how to hide dishonest acts. Instead, I am simply recommending you remain honest and upright in public and private correspondence. With everything on the record, it's best that the record show you in the best possible light. end of article

In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. For further information on this article, please contact Adam Atlas, Attorney at Law by email at atlas@adamatlas.com or by phone at 514-842-0886.

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