Confidentiality and Non-Disclosure Agreements

Commonly referred to as a “NDA,” a confidentiality or non-disclosure agreement defines an employee’s obligation to protect the confidential information of their employer.  These agreements are often negotiated as part of an overall employment contract or a separation or severance agreement.  Should a dispute arise between the employer and employee, an employer may seek to enforce the confidentiality or non-disclosure agreement in a court of law.

A qualified and experienced employment lawyer can provide invaluable help to an employee when negotiating this type of agreement. Penalties for violations to these types of contracts can result in severe legal and financial consequences.  If the employer brings and enforcement action, the employer may demand payment of significant damages as well as the employer’s legal fees and expenses – and the employee may also have substantial attorney’s fees defending the action. An experienced employment attorney can identify provisions in the agreement that could be burdensome to the employee and negotiate or remove these before the agreement becomes legally binding. Regrettably, many employers will include contract provisions that are overreaching and far more than reasonably necessary to protect their private information. An unknowing employee who agrees to overreaching provisions may serious limit their future employability during the term of the agreement.

What’s Typically Covered in a Confidentiality Agreement?

Confidentiality agreements typically include that employees must maintain confidentiality for a number of things, including the following:

• Financial information, including product pricing and revenue
• Customer lists
• Sales methods and strategies
• Proprietary services, materials, technology and processes
• Future plans including new product and service developments
• Trade secrets

Negotiable Stipulations in Confidentiality and Non-Disclosure Agreements

A sound confidentiality agreement will specifically define what information is considered confidential.  As the saying goes – “the devil is in the details.”  The employee must fully understand the obligations that the confidentiality agreement imposes on them.  The employee will be bound to keep confidential information secure and also to never encourage others to reveal such information.  There are negotiable exclusions that can be included in this agreement.  For example, the agreement may provide that the employee may be able to disclose certain confidential information if the employee knew the information before joining the company or if this information is generally known by similar employees in the industry.

It is important in a confidentiality and non-disclosure agreement to specify a time period for which the employee is legally bound to protect confidential information.  These time periods can be stated in years or remain open-ended depending upon the type of employment and confidential information being shared.  Whatever the time period is, the employee must fully understand the limitations this may impose as far as their future job opportunities or ability to start their own business.

The final piece of the confidentiality agreement concerns penalties and procedures that will be enforced in the case of a breach or dispute of contract.  Legal counsel is vital to ensuring that the terms of these stipulations are fair and reasonable for the employee.  If the penalties stated are too harsh, or the process to resolve disputes is too vague, the consequences for the employee can be long lasting and severe.  For example, many employers may seek “liquidated damages,” which is a predetermined penalty for each violation of the agreement – for example, $10,000.00 for each violation of the agreement.  Theses liquidated damages may have no reasonable relation to the employer’s actual damages in the event of a disclosure and may be intended simply to be punitive.

Legal Counsel Can Help Avoid Potential Litigation

Consulting with a qualified and experienced employment lawyer can help an employee avoid future problems when negotiating a confidentiality and non-disclosure agreement.  Employees accused of violating a confidentiality agreement risk damage to their personal and professional reputation, and the cost of litigation can be financially overwhelming.  Even when the underlying case has little merit, employers often seek to enforce these agreements to prevent an employee from being hired by a competitor or otherwise competing with the employer.  The employer, who has extensive financial resources, may use the agreement to unfairly prevent an employee from earning a living and competing with the employer.  Worse yet, the employer may seek to make and “example” of the employee, by essentially trying to bankrupt the employee so that other employees do not attempt to leave the employer out of fear.

An experienced employment lawyer knows what a contract should include, what terms to avoid, and what provisions are fair and reasonable. At McOmber McOmber & Luber, P.C., we are committed to protecting the rights of our clients, as well as a client’s future employment and business opportunities.