What is a Nondisclosure Agreement or NDA?
A Nondisclosure agreement, or NDA, is an agreement between an employer and an employee or between shareholders in a company which has trade secrets, proprietary interests, and intellectual property that must be protected either during the time of employment and/or after the time of employment.
What is the Effect of a Nondisclosure Agreement?
If an NDA is enforceable, which is another subject entirely, a person who is subject to the limitations laid out in the NDA may face damages related to breach of contract and possibly other actions as a result of violating the terms of the agreement. Violation of an NDA can result in fairly substantial damage awards to an employer or the shareholders in a mutual NDA and therefore breaching an NDA should be avoided at all cost.
Should I sign an NDA?
Whether or not to sign a nondisclosure agreement is a question that cannot be answered with a simple yes or no. An attorney with experience reviewing such contracts should be consulted to address a number of issues raised by asking this question.
The first issue, when deciding whether or not to sign an NDA, is to determine how restrictive the agreement is on the employee. For example, an agreement that informs an employee that he or she can never work in a given field while using a specific trade secret or intellectual property maybe too restrictive to be enforceable. In such a case, there may be little risk associated with signing such an agreement because the agreement would likely not be enforceable if brought to court. On the other hand, if the NDA clearly and specifically lists the trade secret, intellectual property or other matter that the employee must not engage in, such a narrowly tailored agreement could be problematic for an employee if that employee thinks that in the future he or she may need to use that information in a professional setting.
What Type of Information Do Nondisclosure Agreements Protect?
The aim of a nondisclosure agreement, from the employer’s perspective, is to restrict the employee’s behavior while they are employed and at least, in the near future. NDA’s typically deal with limitation placed on the employee in revealing client lists, pricing structures, management strategies that may be very unique, trademark or copyright related information, etc. A strong nondisclosure agreement will place specific limitations of an employee’s conduct such that the limitations are narrowly tailored to the specific activity which the employee should not engage in. When and NDA is drafted in a narrowly tailored manner, the likelihood of the NDA being enforced in a court increases.
What are Some Reasons an NDA Might Not be Enforceable?
At its root, an NDA is a contract. As with all contracts under Massachusetts and common law, the contract must contain all the necessary elements of a contract. One common element that must be present in every contract for the contract to be enforceable is consideration. And it is exactly the element of consideration which is often lacking in nondisclosure agreements. Consideration, in contract law, is a bargained for exchange of something between the parties. Every contract must have consideration.
If you have signed an NDA or are asked to sign a nondisclosure agreement which does not bind the company to some performance under the contract in return for your signature, it is possible that the NDA may not be enforceable. Enforceability of an NDA, in this context, requires the employer to trade the award of a job in return for your signature on the agreement. Attorney Gaudet is practiced in contract review and has spent many years in executive level management in many business settings. His experience in these areas is invaluable to his application of legal concept and the practice of law in Massachusetts. If you are about to sign a contract that refers to or contains an NDA, contact Attorney Gaudet for a review of the NDA. Also, if you are an employer or shareholders in a startup corporation or LLC and are wondering how to protect your proprietary interests, your intellectual property, and other valuable company assets, contact Attorney Gaudet to draft an NDA that will be suitable to protect your valuable business interests.
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