Non-Disclosure Agreements: Best Practices for Employers and Employees

Table of Contents

Introduction

Companies often possess valuable intellectual property, including trade secrets and confidential information. Leakage of such information to competitors or third parties who are not bound by confidentiality can cause irreparable harm to a business. In today’s digital era, the spread of confidential information on the internet is a significant concern.

Understanding Non-Disclosure Agreements

To protect confidential information, employers and employees commonly enter into non-disclosure agreements (NDAs) before an employee starts working. These legally binding documents ensure that parties involved in a business relationship agree to preserve the confidentiality of disclosed information. NDAs can take various forms, including clauses in consultancy agreements or standalone deeds.

Best Practices for Employers

When it comes to NDAs, employers should follow certain dos and don’ts:

Signing an NDA before employment: It is advisable for employers to have employees sign an NDA before commencing their employment. If additional confidential information needs to be disclosed during employment, further NDAs can be executed before the disclosure. However, if an employee has already started working without signing an NDA, the employer should provide additional consideration, such as a one-off bonus or promotion, when requesting the employee to sign the NDA.
Customizing NDAs: Employers should avoid using generic NDA templates. Instead, they should identify the types of information requiring protection and clearly specify the scope of information in the NDA. This ensures that the NDA is tailored to the employer’s business needs and the employee’s role. It is important to include oral communications related to confidential information within the non-disclosure obligation.
Ownership of intellectual property: Employers should clearly state in the NDA that any intellectual property, such as inventions, ideas, patents, or patent applications developed by the employee during their employment, belongs to the employer.
Including remedies provision: Employers should include a provision in the NDA for remedies such as injunctive relief or damages in the event of an employee’s breach of the NDA.

Best Practices for Employees

Even though employers generally lead the NDA drafting process, employees can protect their interests by considering the following dos and don’ts:

Exceptions to non-disclosure obligations: Employees should ensure that necessary exceptions and defenses are included in the NDA. This may include excluding information that is already in the public domain, lawfully acquired from a third party, or known to the employee before the employer’s disclosure.
Disclosure of confidential information: Employees should understand that there are circumstances in which they may disclose confidential information without breaching the NDA. This includes responding to a subpoena, complying with legal requirements, or sharing information with other employees or third parties bound by NDAs to fulfill job duties.

Conclusion

Non-disclosure agreements should be tailored to each business’s specific needs. Employers should avoid using a one-size-fits-all approach when drafting NDAs. Employees should also be aware that their non-disclosure obligations may continue even after the termination of their employment. In case of doubts or concerns, employers and employees should seek competent legal advice as soon as possible. For more information, visit Garrity Traina.