Home » Employee Issues » Non-Disclosure Agreement Collateral Concerns

Non-Disclosure Agreement Collateral Concerns

As with non-compete agreements, employers are increasingly relying on non-disclosure agreements (“NDAs”) to protect their valuable, confidential information. Because of the importance of the underlying issues at stake in attempting to enforce NDAs (e.g., trade secrets and other competitively valuable information), it is important for employers to evaluate enforceability up front and appropriately invest time and money in proactively considering collateral issues that often arise in the NDA context. Some of those collateral issues include the following:

  • Definition of confidential information. Rather than relying exclusively on general or nebulous terminology in the NDA, employers should, to the extent possible, attempt to set forth the type and/or categories of information subject to the NDA with some measure of particularity. Obviously it is best not to include what purports to be a comprehensive list, but some effort toward specificity in the type of information subject to the NDA will go a long way towards improving the chances of enforceability.
  • Scope of confidential information. Employers should craft their NDAs to only encompass legitimately confidential or trade secret information. Overly broad NDAs that expansively encompass public or non-confidential information are less likely to be judicially enforced should litigation arise.
  • Preserve confidentiality of the information. In addition to defining the information as confidential in the NDA, the employer must separately take steps to safeguard the confidentiality of that information. If the employer does not, it becomes increasingly likely that a court may conclude that the information is not really confidential or competitively sensitive and is not entitled to protection under the NDA.
  • Protect trade secrets. Oftentimes, the definition of “confidential information” subject to a valid, enforceable NDA will differ in some respects from the scope of “trade secrets” protected by state and/or federal law. Employers should consider those differences, if any, in drafting their NDAs and in considering whether additional agreements are necessary to ensure legal protection of their trade secrets.
  • Varying levels of protection may be necessary. Depending on the industry and type of information at issue, the NDA may need to be more specifically tailored to account for heightened levels of protection required for certain types of confidential information (g., health records, consumer date, personal identifying information). In such cases, the NDA should address the heightened protection and include contingencies for return and/or destruction of all data at the conclusion of employment, as well as data security and breach notification.
  • Social media implications. Employers and employees alike should be aware of the impact of NDAs on social media accounts. In one recent case, for example, a former employee of a global recruiting and staffing firm was required to remove thousands of her LinkedIn contacts based on her former employer’s argument that those contacts actually belonged to the employer and not to the employee individually.

In preparing their NDAs, employers should consider these issues to ensure that the resulting agreement adequately addresses their concerns and does so in a manner most likely to be enforceable should litigation arise.

 


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