In this article, we will discuss nondisclosure agreements and answer the following questions:
With more and more companies utilizing big data in decision making and to drive innovation, protecting that data has become a priority, leading to an increase in the utilization of NDAs for new and existing employees. An NDA is a legally binding contract between an individual or entity who holds confidential information, presumably the employer, and an individual who will receive that information. The company requires the NDA in order to protect information about its finances, operations, research, technology, or to maintain a competitive edge. But, can the company force an employee to sign an NDA?
There is no law against a business requiring a new employee to sign a nondisclosure agreement before beginning work. The company has the right to refuse employment if the new employee fails to sign the NDA. The situation becomes a little more complicated if the employee has been around for a while and the company suddenly requires him or her to sign an NDA. While this is not uncommon if the company threatens termination of the employee over refusal to sign the NDA the employee may have a legal wrongful termination case against the employer. In many cases, the company must include some increase in compensation or other “fresh consideration” in the contract or employment situation in order to legally threaten termination over refusal to sign the NDA. Some companies will try to skirt this by including language in the NDA that specifically states that the terms stated in the agreement are the only considerations for signing the agreement and nothing else has been promised by the company in exchange for the employee signing the contract. As an existing employee, you have the right to confer with an attorney regarding any contract or agreement that your employer asks you to sign.
What a business considers proprietary information varies depending on its field of operation, but in general proprietary information usually consists of things like test results, research analyses, customer lists, system specifications, passwords, mechanical data, etc, etc. Regardless of what specific type of information is in question, there are some criteria to consider when determining the confidentiality of any given information:
A confidentiality agreement can’t just be a blanket statement listing all information, communication, etc etc, existing at a company be considered proprietary. An NDA must have clear language that indicates what the company considers proprietary, and by signing the agreement the employee indicates they understand and agree to the items proposed by the company. However, no matter what a company attempts to include in its NDAs there are certain types of information that would not legally be considered proprietary, such as:
If you’re not sure whether you should include an NDA in all your new employee paperwork, or if you need to have existing employees sign an NDA when moving into a new role there are some questions you can ask to better determine the necessity of an NDA, including:
If you answered yes to any of these questions then you may want to consider seeking the help of a qualified business attorney to draft an NDA.
Not all NDAs are created equally. In order to create an ironclad NDA that will hold up in court, here are a handful of suggestions to consider:
If you have any questions about nondisclosure agreements give us a call at 630-324-6666.
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