Enforceability of Non Disclosure Agreements in New York
Courts in the State of New York generally lean toward protecting an individual's employment prospects and livelihood and against forcing a worker's silence. 3 min read
Is there any enforceability of non disclosure agreements in New York? With respect to restrictive covenants, courts in the State of New York generally lean toward protecting an individual's employment prospects and livelihood and against forcing a worker's silence. It's a bit tougher for employers to enforce their NDAs, but companies can take extra steps to make sure their contracts are enforceable.
How Difficult Is It for Employers to Enforce Non Disclosure Agreements in New York?
When someone breaks a New York NDA, the employer may sue the breaching party based on charges including:
- Breach of contract.
- The theft (misappropriation) of trade secrets.
- Breach of fiduciary duty.
- Tortious interference of contract (if a third party was involved in the breach).
In most cases involving potential leaks, New York courts refuse to force a breaching party's silence unless the employer can prove that a company's trade secrets are in danger. Also, New York courts often find that trade secrets are no longer protected once the period for confidentiality ends. In many cases, the employee could only hope to recoup monetary damages.
What Should Employers Avoid When Crafting a New York NDA?
Employers should avoid crafting NDA's with provisions that are overly broad. If the NDA is challenged in court, the court may find that the NDA is unenforceable. In a state like New York, some agreements could be modified by the judge. The judge has discretion in those states to either modify certain parts of the agreement, reject parts of it, or reject it in its entirety. If enough clauses of your agreement are rejected, you will only be able to rely on any applicable state trade secrets laws for protection.
You might also hurt yourself in a future court case if you offer too specific a definition for what a trade secret is in your NDA. You are best served by using the applicable state laws to define what a trade secret is because it might cover more information than your definition does, in case you're taken to court.
Avoid offering your NDA late. You should present the agreement at the beginning of the worker's employment because that is when you, as the employer, will have more leverage. If the employee already has the job and salary, they will have more leverage when you present them with an NDA. By then, the employee might ask for more money or a promotion. If this is not provided (or requested) and the employee signs the NDA anyway, the agreement is not enforceable.
How Can Employers Craft Strong New York NDAs?
First of all, strike a balance and figure out when to be specific in your NDA. It will be easier for you to prove that you have a reasonable claim to confidentiality. This is what you should do with your NDA:
- Talk about the nature of your guarded information and why you treat that information as confidential.
- Reveal the purpose of the agreement.
- Describe how the confidential information will be shared.
- Reveal the types of information that aren't confidential.
- Specify if the sharing of confidential information is only one-way. For example, you could add a provision that informs the employee that you do not want their confidential information and that they are not to give you any.
- Specify how long you will be sharing confidential information with the employee and how long the employee will be required to protect that information. New York businesses with trade secrets have added two time periods for confidentiality in their NDAs. The first is an unlimited time during which trade secrets may be disclosed to employees. The second is a limited amount of time for other bits of confidential information.
Secondly, make sure that "cause" is broadly defined in the agreement. This can protect you from a claim of termination without cause.
Third, include a "liquidated damages" clause to your NDAs. A clause like that should provide a reasonable estimate for the type of damages the business might experience if there is a breach of information.
Finally, seek legal counsel before you terminate an employee who signed a restrictive agreement. It is best that you hire an attorney who will craft a strong restrictive covenant. Since attorneys should be well-versed in their state's laws, a well-crafted contract will have a greater chance of being upheld in court.
If you need help crafting a strong New York non-disclosure agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.