Many businesses have proprietary information that they share with others. It is important to protect this information or else it can be used against. A competitor could use this data to steal customers and revenues.
That is why companies often use legal documents called non-disclosure agreements. Also known as confidentiality agreements, these contracts are in place to keep the parties from disclosing protected information about the business. The business can share sensitive information without fear that it will be shared with competitors.
This information may include marketing strategies, sales plans, pricing information, manufacturing processes, proprietary software, and potential customers. There may also be restrictions involved, such as working for a competitor, stealing the company’s clients, and sharing trade secrets.
Elements of a Non-Disclosure Agreement
Non-disclosure agreements do not necessarily have to be cookie cutter in appearance. They can vary to some degree, but they should include these elements:
- The names of the parties involved
- Definition and examples of confidential information
- How to use the information appropriately
- The time periods involved
- Any exclusions from confidentiality
- Miscellaneous provisions (this may include any laws that apply to the agreement or how attorney fees are paid if a dispute were to arise)
A non-disclosure agreement needs to be written in a way that makes it enforceable. For example, it should be specific or else it could be invalidated by a judge. It should also not be too restrictive, so it should last no more than two years. It should not restrict unfair competition in a limited area or place super-strict limitations on an employee’s ability to find work.
Pros and Cons
When drafted properly, non-disclosure agreements have several key benefits. One of the biggest ones is that important information is kept private. There is little risk of the information being shared with others unless the party wants to suffer the consequences. And the agreement does outline the penalties involved, so everything is upfront. There are no surprises as long as the parties read the document thoroughly. The non-disclosure agreement will have clarity on the type of information that can and cannot be shared. In addition, these documents are fairly inexpensive, often costing under $1,000.
However, non-disclosure agreements also come with several downsides. The biggest issue is that many of these contracts are highly restrictive. They may prohibit an employee from working for a competitor within a large radius (think 100 miles) and for a long period of time (think three years or longer). This means that an employee would be forced to stay with the company or relocate.
Also, if your employer is asking you to sign multiple agreements (such as one for every project), then it can create an atmosphere of mistrust. Also, many workers refuse to sign them at all, so this can prevent top workers from joining the company.
Contact a Chicago Employment Lawyer
Non-disclosure agreements are useful for businesses looking to protect their intellectual property. However, they can be unfair to employees who decide to grow their careers elsewhere.
The Law Office of Mitchell A. Kline can help you understand your non-disclosure agreement and determine if it is reasonable and enforceable. Fill out the online form or call us for a free consultation.