What You Need to Know About Employee Non-Disclosure Agreements
Companies may create non-disclosure agreements to protect the business when hiring a new employee. Here’s everything you need to know about employee non-disclosure agreements.
Employee non-disclosure agreements protect a company’s confidential information. Employees must sign NDAs when beginning a job to ensure they will keep the information listed in the NDAs clauses confidential. A company can file a lawsuit for breach of conduct if the employee violates the NDA.
What is a Non-Disclosure Agreement?
A non-disclosure agreement (NDA) is a legal document ensuring information will remain confidential. An NDA provides strict guidelines and forbids an employee from disclosing certain information to any additional parties. Employers may require employees to sign NDAs before beginning a job.
If an employee breaks the NDA, the employee is completing a breach of conduct. An employer can legally sue an employee for breach of conduct if the employee violated the original NDA.
Types of Non-Disclosure Agreements
Mutual agreements are a type of non-disclosure agreement protecting both parties’ confidential information. Mutual NDAs ensure parties agree not to share information about either party.
Unilateral agreements are NDAs used only to protect one party. A unilateral NDA requires one party to agree not to share information about the party requesting the NDA. Unilateral NDAs only protects the party requesting the agreement.
Related: The Ultimate Employee Guide to Nondisclosure Agreements
Forming an NDA
Companies can create NDAs for each employee to sign before beginning the job. The company must clearly state all disclosure information to avoid later conflicts about the terms of the agreement.
Disclosure of NDAs must include the following requirements for the receiver:
- The date the agreement becomes effective
- The business relationship
- The confidential information
- The disclosing and receiving party’s information
- Name of any individuals informed of the confidential information
The company will provide detailed clauses disclosing confidential information to the employer in the NDA. The company must explain all confidential business matters so the employee knows all business matters. The NDA may contain clauses requiring the employee to keep all information confidential even if the employee leaves the company.
Related: Do I Have a Case for Wrongful Termination?
A company may include the following information in an NDA:
- Business strategies
- Customer/client lists
- Designs
- Financial information
- Government information
- Marketing materials
- Prototypes
- Samples
- Software
FAQs About Employee Non-Disclosure Agreements
What if I do not provide an employee with an NDA?
Companies do not have to provide employees with NDAs. NDAs are legally encouraged to ensure the confidentiality of all business information.
How can a company ensure the NDA is enforceable?
Companies must use specific language to ensure the employee understands the meaning of each clause. If the company does not explicitly define the terms, the employee could get away with more and challenge a future lawsuit.
What happens to the terms of the NDA if it expires?
The original NDA must state the date the information is valid. If an employee breaks the acts defined in the NDA, but after the NDA’s termination date, they did not breach the conduct. Companies must draft new NDAs to extend the period of effectiveness.
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