Non-Disclosure Agreements: Their Proper Use

Types of Information Non-Disclosure Agreements Address

Non-disclosure agreements (NDA) allow companies to keep proprietary information out of their competitors’ hands. A high level of confidentiality is necessary for companies with innovative ideas. In some instances, the innovation is already making the company a profit. In other instances, a start-up company might need funding to launch its business. Having potential investors sign non-disclosure agreements protects their interests.

In addition to non-disclosure, an NDA prevents employees, clients, investors or other businesses from using proprietary information for themselves.

Non-Disclosure Agreement (NDA)

What Types of Information Can Non-Disclosure Agreements Include?

An NDA could apply for the following types of information:

Financial information (when selling your company)
Marketing information
New technology
Proprietary product information
All of the above among employees

Reasons for Using Non-Disclosure Agreements with Employees

Businesses often use a unilateral agreement with employees. A unilateral agreement is a contract that applies to one party, in this case the employee. The employee agrees to keep confidential the information learned on the job. Types of confidential information may include business trade secrets, copyrighted information, technology or research being done.

Situations Where an NDA Does Not Apply

Based on New York law, as of January 1, 2020, non-disclosure agreements must contain additional stipulations for employees. An NDA must allow employees or potential employees to speak with the following:

Law enforcement
Equal Employment Opportunity Commission (EEOC)
NY Division of Human Rights
Local commission on human rights
Attorney retained by the employee or potential employee

If an NDA does not contain language to this effect, courts will consider it null and unenforceable when it relates to discrimination complaints. (JD Supra)

When to Seek Legal Counsel

If concerns arise over a non-disclosure agreement, you should consult with an attorney. At Stephen Hans & Associates, our attorneys provide legal advice and representation to employers for all types of employment law issues. We have represented numerous employers over the years, and you can rely on our decades of experience.