Non-disclosure agreements (NDA) give companies peace of mind. They ensure former employees can’t take trade secrets, customer lists, and other valuable information to a competitor. Thus, NDAs help protect the long-term competitive viability of the company.
However, they cannot be all-encompassing. Although California law allows fairly expansive non-disclosure agreements, there are limitations as well. If an agreement exceeds the established paraments it could be successfully challenged in a court of law.
To ensure an NDA is legally enforceable, here’s what companies should keep in mind:
- Parties: The parties should be clearly identified. The employer, the employee, and all relevant parties should be named.
- Expiration: Non-disclosure agreements can’t last forever. The language should clearly set forth a reasonable time limit for the agreement. Employers should be wary of setting a time limit over 50 years.
- Scope: Exactly what information is governed by the NDA? The language should be explicit. Does it pertain to just client lists? Or are trade secretes included as well? The employer should go into great detail here. If the wording is ambiguous, the courts may not rule in their favor.
- Obligations: What are the employee’s obligations? Some non-disclosure agreements allow sensitive information to be shared with only certain parties or in a certain context, others require a vow of silence. The agreement should make the obligations for all parties abundantly clear.
If propriety information is shared with a competing company the consequences for a business could be devastating. The stakes are similarly high if an NDA gets challenged in court. For this reason, businesses should have all non-disclosure agreements drafted with the help of an experienced attorney. They can ensure the products and procedures you worked so hard to develop are protected from the competition.