At some point in your professional career, your employer will ask you to sign a Non-Disclosure Agreement, in order to protect their trade secrets. You may even have one sprung on you at a job interview, with little time to comb through the fine details. Don’t stress, it’s all standard business practice. Consider these 7 important tips for the next time you are presented with an NDA, to save yourself from future headaches, long-lasting obligations, and even a lawsuit.
What is an NDA?
A Non-Disclosure Agreement is a written document establishing a legally-binding, confidential relationship between parties, providing what information the parties consider confidential, and the prohibition of the other party from revealing it to others.
An employer will often require an employee to sign an NDA because it allows their company to operate at a higher level, with less risk. A functional NDA is a catalyst for the free-flow of confidential information within a company, pivotal for maximizing profit and efficiency, without the fear of such information being made publicly available. Confidential and proprietary information that companies aim to keep secret include; client lists, technologies, proprietary relationships, marketing and design strategies, and various other trade secrets. Understand, your employer is not asking you to sign an NDA out of mistrust, they are asking you to sign one because it is essential to conducting business smoothly and efficiently.
Whether you are an every-day office worker, or a computer professional at Booze Allen Hamilton, you will likely be required to sign an NDA. Next time you are presented with an NDA, you should be prepared to analyze it with a cool and collected approach, ensuring your best interests are preserved.
Seven Things You Should Consider Before Signing
- Look for broad and vague language: When analyzing an NDA, make sure the definitions of proprietary and confidential information are thoroughly defined. Be skeptical of broad and vague language that opts to unreasonably limit your ability to discuss and divulge information. Make sure to exclude these four categories of information from your NDA in order to better protect yourself:
- Publicly available information
- Information you already possess or may acquire on your own
- Information you can prove you learned of independent of the protected information provided for under the NDA
- Information received by a 3rd party source
- Understand the document’s scope: Reflect on what the NDA is asking you to keep confidential and for how long. What must you do to keep the information secret? What type of information are you prohibited from disclosing? How long after your departure are you expected to keep the information private?
- The consequences of breaching it: Be wary of unusually extreme or unfair punishments for breaching the NDA. Weigh the proportionality of the punishment to the breach, and if the punishment far outweighs the breach, refrain from signing. You should also make sure the NDA isn’t heavily in favor of one party. Steer clear of an NDA that imposes responsibility on you for breaches by third parties, including your coworkers and other employees, without a similar provision to balance.
- The timing of your John Hancock: Consideration, a bargained-for exchange of value between parties, is a basic element of all contracts. You will likely be asked to sign your NDA at before you begin work, where your employment suffices as standalone consideration. The issue arises once you are asked to sign an NDA after starting your job. You may be entitled to “fresh” consideration, as most states require “new” and “fresh” consideration where an employee is asked to sign an NDA after commencing work. Your “fresh” consideration may come in the form of a promotion, additional vacation days, a bonus, or various other employee benefits.
- Liquidated damages: Run, and don’t look back. An NDA containing a liquidated damages provision entitles your employer to a specified amount of damages paid to them, without ever having to prove you were the direct cause. Most liquidated damages provisions are oppressive and contrary to public policy. Don’t gift your employer an automatic recovery for something you may not have even done.
- You can negotiate: Henry clay, Former speaker of the House, and Secretary of State, under John Quincy Adams, so infamously stated, “A good compromise is when both parties are dissatisfied.” Don’t be afraid to ask to modify or alter the documents terms if you think something is unfair or out of place. It never hurts to ask, and companies are much more likely to allow changes to surprise or last-minute NDAs. With any functional contract, there should be a balance between parties. Ask for clarifications, and spell out any concerns you have about the provisions or terms of the agreement.
- Go with your gut: If something in the NDA seems suspicious, it probably is. Having an attorney check over your contract and NDA now may seem like an inconvenience, but is a fraction of the cost and hassle you could suffer later on down the road. A few dollars now, could save you years of hardship, stress, and even a lawsuit. Also, if the NDA seems overly oppressive or suspicious, there is nothing wrong with scrapping the NDA altogether and walking away.
Non-Disclosure Agreements are essential for any employer looking to protect their proprietary and confidential information. Don’t open yourself up to future litigation or headaches for accidentally revealing information you were given fifteen years and three jobs ago. Although NDAs may appear overly encroaching and daunting, with these 7 tips, the next time you are presented with one, you can better protect your future legal and financial obligations.