Employee Non Disclosure Agreement: Everything You Need to Know
An Employee Non-Disclosure Agreement (NDA) is designed to prevent an employee from disclosing any proprietary company information or procedures without permission.10 min read
What is an Employee Non-Disclosure Agreement?
An employee typically is asked to sign this NDA prior to beginning any work for the enterprise. Its sole purpose is to make it obvious to any new hires or employees that they are legally restricted from sharing trade secrets of the company without permission.
It is typically included as part of the onboarding process in new-employee orientation, along with information about compensation, benefits, insurance, etc. Attorneys recommend obtaining a non-disclosure agreement before the employee begins working for the company. More recently, employers are often including language from the Defend Commercial Secrets and Techniques Act. This may include information about legal fees and punitive damages for ex-employees or independent contractors.
It's important to include legal language in an NDA to provide very comprehensive coverage for a corporation. It can also be smart to include clauses that indicate that anything that an employee creates while on the job belongs to the company. This may also include the development of any proprietary information or procedures.
Consult with a legal professional to include or exclude provisions that are relevant to your requirements. A corporate lawyer or intellectual property lawyer can help in determining your needs and put together an appropriate non-disclosure agreement agreeable to all parties.
During the course of normal business, an employee may be exposed to certain confidential information held by the employer. This information includes any material that isn't readily available or generally known by others in the industry. It is also valuable on a commercial level to the business. The information is often referred to as a trade secret.
Confidential information also extends to data about employees, for example, their salaries, position duties, personnel data, performance review data, etc. Even data that is shared with prospective employees, suppliers, contractors, consultants, affiliated group enterprises, and the like, but that is not typically shared with the public can be considered confidential information. In other words, any data, that, if disclosed to the public or to other firms, can negatively impact a company, can be regarded as proprietary information.
Other examples of confidential information include:
- Cost information about the business
- Sales information
- Unpublished financial or accounting documents
- Marketing methods and/or markets
- Business plans
- Customer lists and details
- Supplier information and lists
- Advertising strategies
- Purchasing techniques
Technical information related to a company's services and products also fall under the confidentiality protection requirements. This type of information could include:
- Software code
- Product know-how
- Product development
- Technical correspondence and memos
- Research projects
- Test results
Confidential information can also include information or trade secrets held by other businesses or individuals. A non-disclosure agreement may require that an employee won't divulge these secrets to the business, use them in the regular course of enterprise business, or trigger the business to make use of them. Employees may not share or use other companies' trade secrets with their current employer.
Sample Language for Inclusion in an NDA Around Certain Topics
- Non-disclosure of Trade Secrets
Employee shall maintain firm's confidential data, whether or not it was developed by employee, within the strictest confidence. Employee won't disclose such info to anybody exterior to the firm without firm's prior written consent. Nor will employee make use of any confidential data for employee's personal functions or to a benefit apart from firm. Employee has an obligation to deal with any confidential information in the employee's possession or knowledge as a trade secret.
- Return of Materials
When Employee's employment with Firm ends, for no matter motive, Employee will promptly return all originals and copies of all paperwork, data, software program applications, media and different supplies containing any confidential data in their possession. Employee shall also return all tools, records data, media, software program applications, documents, and property belonging to the Firm. Additionally, an employee must return any files that belong to the business.
- Confidentiality Obligation Survives Employment
An employee's obligation to maintain confidentiality and the safety of confidential data continues even after an employee's employment with the firm ends and continues for as long as such confidential data stays a commercial secret.
- General Provisions
Severability: If a court determines that any provision of this agreement is invalid or unenforceable, the rest of this agreement shall be interpreted in order of greatest impact to the intent of firm and employee.
Integration: This agreement expresses the whole understanding of the events with respect to the subject material and supersedes all prior proposals, agreements, representations, and understandings. This agreement can only be amended in writing and signed by both the firm and employee.
Waiver: This agreement shall not include a waiver of prior or subsequent rights.
Injunctive Reduction: Any misuse of confidential data in violation of this agreement that may cause the firm irreparable harm will allow the firm to seek an injunction within the appropriate jurisdiction enjoining any further action of additional misuse. Any misuse of confidential information in violation of this agreement that may cause damage to the firm will allow the firm to seek an injunction.
Indemnity: Employee agrees to indemnify firm for any and all damages, losses, expenses, claims or bills suffered or incurred by firm because the employee has breached this agreement.
Legal Professional Charges and Bills: In a dispute arising out of or associated with this agreement, the prevailing party can seek appropriate legal fees and costs from the other party.
Governing Legislation: This agreement shall apply in accordance with the legal guidelines of the State of ________________.
Jurisdiction: Employee consents to a unique jurisdiction and venue for federal and state courts situated in ________________ in a motion arising out of this agreement
Successors & Assigns: This agreement shall bind every employee's heirs, successors, and assigned representative.
- Notice of Immunity
Employee is a person that shall not be held criminally or civilly liable in regards to any federal or state commercial secret legislation for the disclosure of a commercial secret that is made: (i) in confidence to a federal, state, or official authorities, both directly or indirectly, or to an lawyer; and (ii) solely for the aim of reporting or investigating a suspected violation of legislation; or is made in a criticism or different filing in a lawsuit or appropriate legal proceeding, if such submission is made underneath seal. A person who records data for a lawsuit to report a suspected violation of legislation might disclose the commercial secret to the lawyer of the person and use the commercial secret information within the court docket, if the person: (i) records data containing the commercial secret underneath seal; and (ii) doesn't disclose the commercial secret, apart from pursuant to a court docket order.
- Employee Non-Disclosure Agreement
That upon the termination of my employment from the firm, the firm might notify any future or potential employer or other party of the existence of this agreement and shall be entitled to a full injunctive remedy for any breach.
- Non-Disclosure Agreement
A non-disclosure agreement is a written authorized contract between an employer and employee. A non-disclosure agreement applies throughout an employee's employment and for a time frame following employment termination.
When Else Are Non-Disclosure Agreements Used?
A non-disclosure agreement can also be utilized in different circumstances when an employer needs to preserve confidential and proprietary information. Occasionally, parties may request another party to enter into an NDA when the circumstances of the relationship are unclear, as in seeking investors. Importantly, as a legally binding document, it provides a company with recourse if confidential or proprietary information is subsequently made public by the other party.
In the course of recruiting a prospective employee, it may be the case that the candidate is asked to sign an NDA. This is because confidential information often is shared with the candidate during interviews. Without having the protections of an NDA, it might be almost impossible to have any kind of substantial discussion about potential employment. Thus, an NDA allows both parties to continue the conversations with an agreed-upon set of stipulations.
A company will also often use a non-disclosure agreement to enter into a discussion with a vendor that involves merchandise, components, and different proprietary information sharing to find out if the seller has the aptitude and capability to supply the mandatory product. Thus, a company will need to use an NDA involving inventory, or to allow for due diligence, or any interplay where confidential information is shared.
Additionally, throughout due diligence, anyone evaluating confidential company information is required to sign a non-disclosure agreement. This includes accountants, investors, management staff, consultants, partners, etc.
What Should a Non-Disclosure Agreement Cover?
A non-disclosure agreement can cover a variety of important topics. Each individual organization can decide which aspects of the standard agreement are most critical. For example, in a setting where employees come up with new ideas and create things while on the job, a non-disclosure agreement for this organization might include the rights to those ideas and creations. Many companies retain ownership of any creations and ideas of their employees.
What is an Employee Confidentiality and Non-Disclosure Agreement?
Nearly all companies have confidential and personal info, from product plans and buyer lists to software program and blueprints. In many situations, the disclosure of such confidential information might significantly harm an organization, notably if that material falls into the hands of competitors. In our networked world, information can span the entire globe within hours (if not minutes). The simple act of stating the significance of defending such information could be worthwhile. A confidentiality agreement signed at the beginning of an employment relationship alerts a potential employee that the organization considers this a tremendously important matter.
By signing the agreement, an employee acknowledges that the disclosure of confidential information is a breach of the employment contract, an undeniable fact that has critical and wide-ranging penalties. The agreement's existence permits the events to be considered and protected. An organization has little to gain and much to lose if they don't use confidentiality agreements.
What is a Non-Disclosure Agreement?
A non-disclosure agreement (NDA), is also known as a confidentiality assertion or clause. A non-disclosure agreement (NDA) is a contract that provides protection to both parties engaged in an enterprise relationship when information is being shared. A non-disclosure agreement (NDA) clearly stipulates that certain data is proprietary, confidential and a trade secret, and specifically identifies such information. Clauses will also outline remedies and penalties. Additionally, whistleblower clauses are now also typically included.
What Can I Use a Non-Disclosure Agreement For?
A non-disclosure agreement can cover many types of information, including employment specifics, offers, and specifications for inventions. An NDA is important when recruiting, interviewing and hiring prospective employees. An NDA is vital when discussing business with a possible supplier, source, customer, or partnering business. NDAs are key to protecting your invention, especially if you are looking to utilize that concept for a product or other commercial endeavor. The NDA can protect designs, specifications, and patentable ideas. Finally, NDAs come into use when working with short-term employees, contractors or when auditors visit your facility, etc.
What is Included in a Non-Disclosure Agreement?
- Events, information
- Time limits
- Particulars about what is not to be shared
- Obligations of each party
- Possession and return of information
- Signing details and signature
Employers may also choose to include specific provisions to acquire ownership of employee-developed trade secrets that are adopted by the company. The terms and conditions of the agreement should outline the rights of the person signing it, as well as the other party involved. Both parties can elect to include alternate provisions, depending on the needs of those involved in the agreement. Before providing a non-disclosure agreement for signature, make sure to take out any unnecessary provisions. If you want to make sure that all information included is applicable, consult with an experienced attorney. An intellectual property or business attorney will be able to provide the best guidance in regard to a non-disclosure agreement.
Do I Need a Non-Disclosure Agreement?
Chances are you'll want a non-disclosure agreement if you answer yes to any of the following questions:
- Are you looking for or promoting an enterprise?
- Are you an employer that should protect company secrets?
- Are you an inventor talking with a company?
- Are you an employer hiring a contractor or freelancer?
Should I Use a Non-Disclosure Agreement With a Current Employee?
If you have current employees that you'd like to agree to the terms of a non-disclosure agreement, you may want to consider offering them something that is more valuable than their current salary and benefits. Many employers also include all-encompassing employment language agreement in the contract containing the non-disclosure agreement. This language could cover duties, salary, and other important issues.
An employer can use the provision found in the Defend Trade Secrets Act to include language around obtaining any legal fees and punitive damages from an independent contractor or former employee. Since the law was passed on May 11, 2016, all employers who wish to use this provision must include a whistleblower provision in their non-disclosure agreements.
If an agreement doesn't include legal language around whistleblowers, the employer can still take legal action in a federal court. However, failure to include this language prevents the employer from recovering attorney fees and/or punitive damages. Including this provision isn't legally necessary but is strongly recommended.
Sample language for a whistleblower provision
A person may not be held civilly or criminally liable under any federal or state trade secret law for disclosing a trade secret that is:
- Made in confidence to a local, state, or federal government official, either indirectly or directly, or to an attorney.
- Made exclusively for the purpose of investigating or reporting a suspected violation of law.
- Made in a complaint or document filed in a legal proceeding, as long as the filing is made under seal.
A person who takes legal action for the purpose of reporting a suspected violation of law is legally permitted to share the trade secret in the court proceeding as well as to the attorney of the individual, as long as:
- All documents relating to the trade secret are filed under seal.
- The individual does not disclose the trade secret, except where required by court order.
Have you been asked to sign a non-disclosure agreement? If you would like to know more about your rights or what kind of protections you need, post your legal need on UpCounsel's marketplace. Lawyers at UpCounsel are recruited from Harvard Law and Yale Law and have on average more than 14 years of legal experience, including work with or on behalf of companies like Google.