Non-Disclosure Clause in Employment Contract
A non-disclosure clause in employment contract is a provision that prohibits an employee from unauthorized disclosure of confidential information.3 min read
A non-disclosure clause in employment contract is a provision in an employment agreement that prohibits an employee from unauthorized disclosure of the employer's confidential information and trade secrets.
What Is a Nondisclosure Agreement?
A nondisclosure agreement, or NDA, is a contract that prohibits a party from disclosing another's protected information and trade secrets. NDAs enable owners of confidential information, such as patents, to share details of their invention or trade secrets with others for a partnership, investment, or mergers without fear of the protected information being misused or disclosed illegally in the future.
Employers also use nondisclosure agreements to prohibit employees from stealing, misusing, or unlawfully disclosing any company trade secrets and confidential information they may have access to during their time with the organization. The agreement aims to prevent the employee from stealing the employer's protected information or using it in a way that will hurt the company.
What Information Should a Nondisclosure Agreement Contain?
A nondisclosure agreement can be as simple as a one-page statement, or it can be a comprehensive document. Regardless of the length or style, an NDA should have the following components:
- Protected Information: The agreement should describe the forms of information the contract applies to. These include protected information about the firm's products and services; trade secrets like customer lists, business plans, and pricing; and employee data, such as private information on workers and their salaries.
- Information That Is Not Protected: Ensure that the contract does not forbid you from disclosing information that you already had access to before becoming an employee at the firm, unless the provision was part of your employment contract, such as a patent assignment. Additionally, the agreement cannot compel you to maintain the confidentiality of information that is already in the public domain.
- Your Obligations: The general obligations required of you in an NDA are to refrain from unauthorized use or disclosure of your employer's confidential information or trade secrets. These obligations remain valid even after the termination of your employment with the firm.
- Penalties for Violating the Contract: Most employers add a clause in the agreement that enables them to take legal action against you if you violate the contract. The employer may ask the court to order you to stop disclosing or using its protected information, and they may seek money damages.
Factors to Consider Before Signing a Nondisclosure Agreement
While many nondisclosure agreements are standard contracts, it is essential to have a clear understanding of the terms before signing. Sometimes, the agreement might allow the employer to seek huge monetary damages in the event of a breach. It might also be drafted with broad and ambiguous language that makes it difficult to understand your rights and obligations under the contract.
It is also vital to understand whether the agreement applies to other aspects of your employment. For instance, the contract may contain a noncompete clause that prevents you from working with competitors of the company after your exit from the company; a clause that restricts you from suing the company; or provisions about the ownership of inventions created while working for the company. If there are difficult areas in your employer's nondisclosure agreement, be sure to consult an experienced employment lawyer for professional advice.
Noncompete agreements are clauses in an employment contract that forbid the employee from seeking employment with or starting a business that is a direct competitor with the employer, in the same geographical area during their employment with the company and for a specific period after the termination of their job.
Nonsolicitation agreements prohibit the employee from encouraging former coworkers or clients of a former employer to move to another company.
Nondisclosure agreements generally require an employee not to reveal any confidential information or trade secrets that could hurt the employer' business interests. NDAs also forbid an employee from making comments that can harm the reputation of the company or its business. It can also restrict the employee from using knowledge acquired from the employer for another company.
Nondisclosure agreements should protect the employer's business without denying employees their right to change employment. Unfortunately, many contracts are overprotective of the employer. If a nondisclosure agreement will restrict your ability to seek employment elsewhere or establish your own business in the same industry, it is better to weigh your options carefully before committing yourself.