5 Things You Should Know About Non-Disclosure Agreements

The term “non-disclosure agreement” (NDA) is one you’ve probably heard before, particularly if you’ve started a new job. Most companies have information they want to keep private, ranging from business plans and strategies to trade secrets and special formulas. NDAs are the primary way in which these companies keep that information safe and out of the hands of competitors and/or the public. Non-disclosure agreements are serious business, so it’s helpful to understand some of the key components that go into them. 

 If you’re currently under an NDA and want to discuss its legality with a contract attorney in Florida, Ludwin Law Group has licensed attorneys ready to help you.

Five Things To Know

Mutual vs Non-Mutual

Non-disclosure agreements come in two distinct forms: mutual and non-mutual (sometimes called unilateral).

 

A mutual NDA is used when two or more businesses are engaged in a partnership or joint venture. In such a situation, both parties will have proprietary information they will have to disclose to each other. An example would be an electric vehicle company working with a green energy corporation to create more efficient products. Both companies will sign a mutual NDA in which they promise not to release information about the product they’re jointly developing.

A non-mutual NDA is frequently used when hiring new employees, and as such, is likely the one you are most familiar with. In this situation, the company is the only party with proprietary information, and the agreement is made to keep the employee from sharing it. An example would be a software company hiring someone to work in a division that is creating brand-new experimental software. A non-mutual NDA will be created so the employee does not disclose the details of this software outside the office. 

Whether it is mutual or non-mutual, a contract attorney can assist you in going over the fine details of an NDA to fully understand its restrictions and legalities.

Information Protected

Non-disclosure agreements are used to protect many types of sensitive information. Some of the most common include:

• Intellectual property - NDAs are frequently used to protect a company’s trade secrets, patents, formulas, or anything else that gives the company a competitive edge.

• Finances - Finances are one of a company’s most sensitive areas, so NDAs are often used to protect them. Information such as estimated costs, total costs, and funding sources can fall under this category.

• Customer data - NDAs also exist to protect sensitive customer information. This can encompass customer profiles, contact information, and even a list of major or well-known customers.

It’s important to note that NDAs can’t protect information that is already common knowledge or can be found publicly. Information that is not public but is already known to the signing party can also not be included, as well as information that may not be public but can be obtained by legal, independent research. It is good to review a non-disclosure agreement with a contract attorney, preferably one with knowledge of intellectual property law; they can help determine if the information in the contract can actually be protected.

Consequences for Violating 

As a non-disclosure agreement is a legally binding contract, violating it can have serious consequences, which will be outlined in the contract. Legal action is the most common punishment; a company can sue you for breach of contract, copyright infringement, or disclosure of trade secrets, amongst other claims. If you’re found guilty, you will have to pay the resulting legal fees and damages, as well as deal with any resulting penalties. Outside of legal action, violating an NDA can also result in the loss of your employment or a hefty fine imposed on you by the company. An injunction may also be filed against you to prevent the release of additional sensitive information. If you leaked any tangible assets or physical copies of information, you’ll likely be ordered to return them. 

Although the mere act of violating an NDA is not illegal, depending on the information disclosed you could be held liable for stealing consumer data or trade secrets, and subsequently be subject to potential jail time. Regardless of the specific consequences, it’s in your best interest to stay out of legal and financial trouble. Therefore, having a contract attorney on hand to review your NDA is a good way to know what could happen should you violate it.

Exceptions to Enforcement

As with most contracts, there are legal exceptions to the enforcement of a non-disclosure agreement. The most common exceptions include:

• Illegal activity - Any NDA that asks an employee not to disclose information regarding illegal activities, or any activity a company is legally obligated to reveal, cannot be enforced.

• Too restrictive - An NDA that restricts too much information has no limit as to the duration of the non-disclosure period, or otherwise highly restricts employee activities, and will likely be found unenforceable in a court of law. 

• Duress - If it can be proven that an employee or partner was made to sign an NDA under duress, or fear of retribution or unemployment, that NDA will be unenforceable, and the employer may be found liable for their intimidating behavior.

If a non-disclosure agreement is found to be unenforceable, for these or any other reasons, a court may either render it void or force the employer to modify it so it is legally compliant. If you’re unsure about the terms of an NDA, it is best to contact a Florida attorney who is familiar with contract law. They can determine if a contract is legally enforceable, and if not, argue against it in court.

Benefits of a Non-disclosure Agreement

Although they can seem intimidating, a proper non-disclosure agreement can benefit both employer and employee. For an employer, the benefits are quite simple. With an NDA, they can ensure that their trade secrets and competitive advantages remain secrets and advantages, with severe penalties that will hopefully dissuade employees from leaking any information. As most NDAs exist as either electronic files or physical papers, the cost to create and enforce them is also low. For mutual NDAs, there is also the relationship benefit created between both parties. Each side agrees to protect the other’s information, which helps maintain a sense of trust and confidentiality.

For employees, the benefits are less clear, but they exist. With an NDA, an employee has a clear outline of what information is and isn’t protected. They can then go to work without worrying about accidentally sharing sensitive company secrets. Depending on their role, an NDA may also put employees at ease, as they can feel secure that their hard work will not be prematurely revealed or leaked.

A contract attorney can go over an NDA with you and outline any potential benefits it will have for your employment.

Conclusion 

Non-disclosure agreements can appear complex at first, but the vast majority of them are quite simple in practice. With the information above, you should have a better understanding of the basics of a non-disclosure agreement. Of course, it is always a good idea to seek legal counsel before signing any sort of contract. A contract attorney will work with you to dissect an NDA in detail, going over its limitations, its benefits, and the consequences of breaching. At Ludwin Law Group, we offer services in contract and copyright law to help you with the specifics of a non-disclosure agreement. With our assistance, you can feel safe and secure in signing an NDA, and help protect your employer’s sensitive information.

FAQ

• What are non-disclosure agreements?

A non-disclosure agreement is a legal contract between an employer and one or more parties, in which the parties involved agree not to disclose the employer’s proprietary information.

• What is the purpose of a non-disclosure agreement?

A non-disclosure agreement exists to protect a company’s trade secrets or other sensitive information. It establishes protections and consequences if that information is disclosed by an employee or partner.

• What is an example of a non-disclosure agreement?

A non-disclosure agreement would be needed if a soft drink company partnered with a food manufacturer to create a new beverage flavor. Both parties would have to sign a non-disclosure agreement protecting the respective formulas of their beverage and food products.

• Can you be forced to write a non-disclosure agreement?

An employee is under no legal obligation to sign a non-disclosure agreement. If a non-disclosure agreement is found to have been signed under duress, it may be found unenforceable. 

• Who benefits from a non-disclosure agreement?

Employers and partners benefit from a non-disclosure agreement by having a signed contract protecting their confidential information from disclosure. Employees benefit from a non-disclosure agreement by having clear boundaries that prevent them from accidentally leaking sensitive information.

• How much does a non-disclosure agreement cost?

The amount it costs to draft a non-disclosure agreement varies depending on the company and the nature of the agreement. Signing a non-disclosure agreement does not cost money.

• How long does a non-disclosure agreement last?

Non-disclosure agreements should come with a set duration, although the exact amount varies depending on the nature of the contract. In cases involving trade secrets, the amount may be indefinite.

• Can you get out of a non-disclosure agreement?

If an employee believes a non-disclosure agreement was signed in error, is too broad in scope, protects non-sensitive information, or is some other way invalid, they can work with a contract attorney to have it rendered unenforceable. 

• Can I work for a competitor if I signed a non-disclosure agreement?

Non-disclosure agreements do not prevent employees from working with competitors. If it can be proven that an employee disclosed information about a former employer, and that information was protected under an NDA, that employee can be held legally and financially liable, and potentially be subject to criminal charges.

• Are non-disclosure agreements enforceable in Florida?

  Non-disclosure agreements are enforceable in Florida, so long as they protect legitimate business interests, and have a clear duration.