What is a Non-Disclosure Agreement and When Should a Business Use One?

There is a lot of misinformation about non-disclosure agreements, and that confusion can lead to business disputes. The short version is that a person who signed a non-disclosure agreement cannot talk about the information the agreement protects with anyone who is not authorized to discuss the topic. Of course, you need to know more than that about non-disclosure agreements. 

Let’s explore what a non-disclosure is and when a business should use one. A South Carolina business contracts attorney can answer your questions about these documents and draft the right kind of non-disclosure agreement for your company.

An Overview of Non-Disclosure Agreements

Non-disclosure agreements (NDAs) go by several names, for example, they can also bear the title of proprietary information agreements (PIAs), confidentiality agreements (CAs), and confidential disclosure agreements (CDAs). If drafted properly, NDAs are enforceable in court and can protect the information the company wants to keep secret.

Situations In Which Businesses Use NDAs

Companies require entities who are not employees of the business to sign confidentiality agreements to protect the company from the disclosure of private business information in these situations:

  • When a prospective buyer wants information about the business that the general public does not know, the company might require the potential purchaser to sign an NDA.
  • Vendors, suppliers, and prospective investors also might have to sign a confidentiality agreement before getting access to private information about the company.

Many companies routinely require employees to sign confidentiality agreements, particularly if their job duties require the workers to access private information like customer lists, client data, trade secrets, marketing plans, and other topics that could harm the business or benefit competitors if leaked.

Before the advent of non-disclosure agreements, a person could go work for a business, access their confidential information, and then set up a new business in competition with their former employer. NDAs prevent that outcome and provide legal remedies for the employer if a former worker misappropriates protected information.

The company can require new employees to sign confidentiality agreements as a condition of their employment. The company might have to offer existing employees some type of consideration to sign NDAs if they have not signed one for the company in the past.

Enforceability of Confidentiality Agreements

An NDA might not get enforced by the court if the judge determines that the company is using the document to restrict more than they need to or to take away legal remedies of the worker. Here are some examples of NDAs that might be unenforceable:

  • The agreement has an unreasonable duration, like restricting the employee from opening or working for a competing business using similar business processes for 20 years after leaving the company.
  • The geographic scope is too large, for example, banning the worker from engaging in similar work anywhere in the United States, even though the company’s clientele were only located in one city in South Carolina. 
  • Banning the employee from ever discussing anything they learned on the job, no matter how mundane, would be too broad or too restrictive. A department store does not need the same protections as a government intelligence agency, by way of example.
  • Prohibiting the worker from reporting the company for breaking the law or exercising their legal rights if the company engaged in illegal activity against the employee. A business cannot force workers to sign away their right to be free from illegal discrimination or other rights as a condition of employment.

There are many other reasons why an NDA might be unenforceable, which is why you will want to work with a South Carolina business attorney to tailor your non-disclosure agreements to your needs. Reach out to our office today for help with your case.