Has your employer recently asked you to sign a nondisclosure agreement? At many companies, a nondisclosure agreement – a contract by which you promise to maintain the confidentiality of the employer’s trade secrets – is a standard part of the new hire paperwork employees must sign. Or, you might have received a nondisclosure agreement upon being promoted to a position that gave you access to confidential information. And sometimes, an employer will simply realize at some point (perhaps on retaining an attorney or hiring in-house counsel) that it should get this type of protection in place.
Generally speaking, employees are already legally obligated not to reveal an employer’s trade secrets. So, signing a nondisclosure agreement won’t necessarily bind you to any additional responsibilities. However, not all nondisclosure agreements are the same. Some nondisclosure agreement will require you to keep a broader set of employer information confidential, even if it doesn't qualify as a trade secret. And, sometimes employers combine nondisclosure agreements with other agreements, such as an inventions assignment agreement or a noncompete agreement.
No matter when or why you are presented with a nondisclosure agreement, you should read it carefully and consider all of its terms before signing.
A nondisclosure agreement is a contract in which one party agrees not to reveal the other’s confidential information and trade secrets. These agreements are used when, for example, an inventor wants to meet with potential investors, developers, or partners, or when two companies meet to discuss a possible merger. In these contexts, the purpose of the agreement is to allow everyone to speak openly, without fear that someone will steal a great idea or misuse confidential information at a later date.
In the employment context, a nondisclosure agreement is typically used when an employee will have access to the employer’s trade secrets or confidential company information, or when an employee’s job is to develop and work on these types of intellectual property. The employer wants assurances that the employee won’t steal the company’s information or use it to start or join a competing company.
A nondisclosure agreement can be a simple one-page statement or a lengthy document filled with legalese. No matter the style or length, it should include some basic information, including:
As noted above, many nondisclosure agreements are standard contracts, which may not require you to give up valuable rights you would otherwise have. That doesn’t mean you should sign anything your employer puts in front of you, however. For example, your employer might be so broad and general in describing the information it wants you to protect that you can’t figure out what you are agreeing to. Or, the contract may include a provision entitling the employer to significant money damages if you violate its terms.
And, you should read the agreement carefully to see if it covers other employment matters. For example, an employer may include terms about ownership of inventions created during the employment relationship. Or, the agreement may include a noncompete clause that restricts your ability to work for other companies after your employment ends, or an arbitration clause that requires you to give up your right to sue in court.
If you have any questions or concerns about your employer’s nondisclosure agreement, you should talk to an experienced employment lawyer.