Non-disclosure agreements, or NDAs, are common in industry, even if you don’t work at a top company.
This article will explain the components of a non-disclosure agreement, discuss how you can be asked to sign one, and guide the enforcement of NDAs.
NDAs are used to protect confidential information, which must be shared.
Companies often ask employees to sign NDAs before taking a job or accepting a promotion, and sometimes require them to sign one before interviewing.
Businesses that work together often sign joint NDAs.
What is a Non-Disclosure Agreement?
A non-disclosure agreement (NDA) is an agreement between two or more parties that establishes the confidentiality of certain protected information.
In a business context, an employer asks an employee to sign an NDA to protect proprietary information or trade secrets that the company wants to keep confidential.
What is protected under an NDA is up to the employer, but NDAs include restrictions such as:
Basically, if the information is beneficial to the company and to its competitors, employers may want it covered by an NDA.
Instead, for an NDA to be enforceable, it must protect confidential, essential information. NDAs are usually for the duration of employment at the company and extend beyond temporary layoffs.
NDAs cannot cover information that is already in the public domain (or is publicly available in your work).
Information you receive outside of work (from another person) or anything that an employer allows an employee to disclose is not confidential.
There are three types of NDA:
Unilateral. Most NDAs are unilateral, which means that one party (the employee, in this case) agrees not to disclose confidential information.
Both of them. Mutual NDAs guarantee that both parties must maintain company confidentiality. This is very common in commercial and business relationships.
For example, if a manufacturer makes a part based on a company’s design, neither the manufacturer nor the company will disclose any trade secrets related to the company’s design.
Multilateral. Multiple NDAs cover more than two parties and prohibit one or more parties from disclosing information.
When Are Non-Disclosure Agreements Signed?
Non-disclosure agreements are usually signed when you get a job, but there are other times they can also be signed, such as before promotions and interviews.
When you accept a job. Nondisclosure agreements are often part of a larger contract, such as an employment contract, so they are often signed when an employee starts a new job.
Both parties must receive something of value for each agreement; otherwise, it’s just a gift. In the case of signing an NDA for employment, the employee’s “consideration” (what he earns) is the employment itself.
Before the interview. In some cases, an employer may ask you to sign an NDA before applying for a job. It can be easy if the company wants to hide their interview questions.
It may also be that the interviewer wants to discuss non-public issues the company is facing (and does not want competitors to learn) or that trade secrets may come up during the discussion.
The above may not apply to most jobs. However, if you want a higher position, it is impossible for the company to discuss important matters without entering into confidentiality.
When you are promoted. If you have been promoted to a position with access to information, your employer may ask you to sign an NDA at the time of the promotion.
If you are a contract worker. The company may ask a person closely related to the company to sign the NDA.
For example, if a contractor, consultant, or vendor has access to a company through their relationship, the company may want to protect that confidentiality with an NDA.
Startups (or any companies) may also require investors or investors to sign an NDA before submitting their proposal.
Highlights of Your Non-Disclosure Agreement
Now that we know what a non-disclosure agreement is, it’s worth looking at some of the key features of NDAs:
Who are the parties? Requirements – The NDA must clearly state who is involved. The discloser is the person who provides the information (the employer), and the recipient is simply referred to as the “receiver” (the employee).
The information is confidential. The agreement should describe, in detail, what is considered confidential.
NDAs can’t be vague words that prevent you from discussing anything about your workplace experience. As we said before, they must express the important facts in a certain way.
What is not confidential. It is difficult for the contract language to be real here because there is a whole group of information you learn on the job that is not confidential. In general, this section will discuss the appropriateness of disclosures that are often selected.
For example, if you have to comply with a legal or financial institution, you may need to disclose confidential information.
In time. NDAs can’t last forever, and your agreement should specify the exact time period your agreement is valid for.
Let’s say your NDA is part of an employment contract. In that case, that time is usually the time of your employment, including a short period of time after you quit your job so you don’t immediately take the trade secrets to your competitor.
Another position. In addition to maintaining certain confidentiality, an NDA may provide guidance on how to maintain confidentiality. For example, the contract may require the employee to destroy or return confidential documents after use.
Another word. A well-written part of your contract may include things like contract modification rules and a dispute resolution process.
A decision that allows disclosure. NDAs must give the discloser (employer) the right to authorize the recipient (employee) to disclose certain confidential information under certain conditions.
The above is harmless and important. Some things to consider are:
Other restrictive clauses. Along with non-solicitation, non-disparagement, and non-compete agreements, non-disclosure agreements are known as “restriction clauses.”
All three are pretty standard elements of the work contract, so don’t be surprised if you see language that prevents you from working for a competitor after you leave the company now.
However, be aware of these possibilities when reviewing your employment contract.
Not begging. A contract may prevent you from asking former co-workers or employees to join you at the new company. This should be a separate clause from the NDA.
Authority. When a conflict arises, where will it be resolved?
Law. An injunction is a provision that allows the whistleblower to obtain a court order to prevent the receiver from disclosing the information.
In other words, if the employer knows that you want to break the contract, they can go to court and stop you from doing so.
Forfeiture of trials. An NDA may state that you waive your right to be sued if there is any problem.
Disagreement. Some NDAs include language that expressly states that the recipient has no right to confidentiality. This only proves that the union is one and not one.
Who has what. Some contracts will state that any ideas you have during your employment are the property of the company. In other words, you may not be able to express your feelings because they are not technically yours anymore.
Even though the above things may sound disgusting, they are all the same. Don’t sign anything you’re not comfortable with. If you have any questions, ask your employer or ask an employment lawyer for more information.
Enforcing Non-Disclosure Agreements
In establishing a non-disclosure agreement, the company has the burden of proving that the employee breached the agreement and that the breach caused injury.
If the NDA is found to be unenforceable, then other NDAs the company has signed with its employees may be called into question.
There are many reasons why an NDA can be considered invalid by a court. Below are a few examples:
Very wide. The NDA must be reasonable in its terms. “Affordable” is a fluid word that depends on the area where you live. An NDA that is deemed too broad or burdensome to the receiver may be thrown out or modified by a court.
There is no imagination. As we said before, the partnership should give both parties something. In the case of an employment contract, the consideration is the employment itself. If you are terminated, you must be paid for signing an NDA and a severance package.
Revealing the party did not keep the secret. If the company fails to take steps to protect certain secrets, then the employee cannot be held liable for disclosing the same.
Information is not valuable or confidential. If an employee discloses information that is either non-confidential or unnecessary (or both), then the court may not agree with the employer.
Uncountable damages. It’s hard to put a dollar value on violating an NDA. This is why most contracts include what is called “water damage.” This means that the employee will pay a fixed amount for any breach of contract.
Courts cannot grant an injunction if damages are included in the language of the contract. In addition, if the actual damages incurred are significantly less than the damages awarded, then the court may adjust the amount accordingly.
These are just a few examples of the difficulties that can arise when trying to implement an NDA. Remember that an employment lawyer is your best resource for informing and understanding your contract.
Non-Disclosure Agreements FAQ
How long does an NDA last?
The NDA takes as long as the company says. Generally, NDAs last between one and ten years, but can be longer if companies want. Some may have perpetual NDAs, though these may be difficult to enforce in court.
Does NDA work illegally?
No, NDA does not cover illegal activities. In most cases, an NDA agreement cannot be used if it requires the employee not to disclose what it is their responsibility to disclose.
However, this means that the employee has to go to the legal system for the matter, not that he can write a blog explaining everything for his own benefit.
Does an NDA protect an idea?
Yes, an NDA protects an idea. It’s not licensed or trademarked, which means others can copy it, but it means you can sue people who share your ideas after you sign an NDA.
Employers prefer employees to sign NDAs because they benefit from keeping their personal information confidential. If you are good at keeping secrets and are careful to follow the spirit of cooperation, you will not face any problem.
Companies need NDAs to stay competitive, otherwise everything about their business could be exposed to competitors. Violating someone can lead to a lawsuit.
We at Zippia are not lawyers, and this article is not legal advice. Laws are constantly changing and vary by jurisdiction, so seek advice from legal counsel if you have any questions about your nondisclosure agreement.
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