WHAT IS AN EMPLOYEE NON-DISCLOSURE AGREEMENT?

An Employee Non-Disclosure Agreement commonly referred to as an NDA is a contract between an employer and employee that restrict the release of confidential information to any other entities not specifically authorized by the employer to receive the confidential information.

Although there are three types of non-disclosure agreements: unilateral, bilateral and multilateral; the most commonly used type for employee and employers is the unilateral non-disclosure agreement.

WHEN DO EMPLOYERS NEED A NON-DISCLOSURE AGREEMENT?

In the course of day-to-day operations employees may become privy to trade secrets, insider trading information, confidential and classified information and in some instances information that may affect the security of a business or even a governmental entity. Employers have to have a way to maintain the integrity of their business practices and confidential information.

Non-Disclosure Agreements are also known as Confidentiality agreements, Secrecy agreements, Proprietary Information agreements, and Confidential Disclosure Agreements.

The name may differ from state to state or with an industry or business, however, the goal of the agreement remains the same: to prevent the dissemination of confidential information by employees to others outside of the business or industry.

Non-Disclosure Agreements are needed:

• To prevent employees from selling or revealing company trade secrets

• To clearly explain what is considered confidential information to the employees

• To explain and establish the company’s Intellectual property policy to their employees

• To prohibit former employees from divulging company secrets and to prevent employees from working with the company’s competitors

• To act as a basis for legal action against employees who have revealed company confidential information

WHAT ARE THE BENEFITS OF A NON-DISCLOSURE AGREEMENT?

The NDA helps safeguard business trade secrets and other confidential information by putting an employee on notice that he or she is signing a legally binding agreement which if breached could surely subject the employee to a lawsuit. For most employees, the prospect of a lawsuit acts a deterrent to breaching the agreement.

Not everything that occurs within an organization is confidential and a Non-Disclosure Agreement helps to clarify and distinguish for the employees what can and cannot be talked about outside of their place of employment and when they leave their respective positions within the company. The need for this clarification is very important because some people may maintain company secrets while they are employed with the organization but they will not hesitate to discuss confidential details of their former places of employment.

A Non-Disclosure agreement clarifies the intellectual property rights of the company and helps to curb the damaging leakage of confidential information. Since intellectual property is a fairly new concept a very carefully worded NDA will help employees to understand exactly what IP is and how it should be protected from those outside the organization. Often times the employee is not aware of the specific treatment that must be implemented in order to protect intellectual property and the NDA and/or proprietary rights agreement will establish the parameters and boundaries needed to keep the information from public disclosure.

WHAT ARE THE ELEMENTS OF AN EMPLOYEE NON-DISCLOSURE AGREEMENT?

The agreement must be very specific and be phrased in clear, concise easy to understand language. NDA’s have been held by courts to be invalid because the language was too difficult to understand by an employee of average reasonable intelligence.

The scope of the NDA must not be too broad that it cannot be enforced by the agreement. Fr example an NDA that did not allow employees to discuss any aspects of their employment would be considered overly broad and unenforceable. An employee still has the right to tell a prospective employer about his work duties that were not deemed confidential; therefore, an NDA that prohibits him or her from discussing his or her job would be unenforceable and the scope of such agreement would be considered as far too broad.

The Non-Disclosure Agreement must provide specific, cogent steps that will be taken in the event that confidentiality is breached even if by court order.