HR Support on Nondisclosure Agreements

Editor's Note: Don't let confidential information fall into the wrong hands!

Melissa A. SilverOverview: One type of employment contract is the nondisclosure agreement. Employers should use nondisclosure agreements to prevent employees (or prospective employees) from taking an employer's confidential nonpublic information to a competitor or sharing the information with another individual who uses it to the employer's disadvantage. An employer's confidential information could include trade secrets and other proprietary information, such as research and development, designs, ideas, techniques, methods and processes, customer lists, and other nonpublic information.

Nondisclosure agreements may be particularly critical to new businesses or existing organizations that have created a new product or service. By being proactive and requiring employees to sign a nondisclosure agreement, employers will be in a better position to recover against a former employee who steals an employer's confidential information or trade secrets for his or her benefit.

Even with an employee's signature on a nondisclosure agreement, theft of an employer's proprietary information may still occur - and is not uncommon. Therefore, employers should take measures to maintain the confidentiality of such information by restricting unauthorized access to this information, creating security codes on the computer system and by requiring nonemployees, such as customers, to sign a nondisclosure agreement.

Employers must make also clear to new employees that they cannot use confidential or proprietary information he or she acquired during his or her former employment through an express representation that he or she is not subject to a nondisclosure or confidentiality agreement. Otherwise, if an employee improperly uses such confidential information and the new employer knew or should have known that the employee was using such information for the new employer's benefit; both the employee and new employer can be subject to a legal action by the former employer/competitor.

Trends: Many states have adopted a version of the Uniform Trade Secrets Act, which provide the employer with an added level of protection for their trade secrets, regardless of whether the employee signed an appropriate nondisclosure agreement. However, in order to ensure protection, employers should still require employees who have access to an employer's confidential information to sign a nondisclosure agreement in the event the information taken by an employee does not rise to the level of a trade secret under the Act.

Author: Melissa A. Silver, JD, Legal Editor

Latest items in Nondisclosure Agreements

  • Multistate Employer

    Type:
    Employment Law Manual

    Multistate employers face the challenge of complying with not only federal laws, but also differing state and local laws. This section highlights some of the states' differences in terms of preemployment testing and background checks, noncompetition and nonsolicitation agreements, and discrimination, pay and leave rules.

  • Terms of Employment: California

    Type:
    Employment Law Manual

    In-depth review of the spectrum of California employment law requirements HR must follow with respect to the terms of employment.

  • New How To on Protecting Trade Secrets, Nondisclosure Agreement Form Added

    Date:
    26 November 2013
    Type:
    Editor's Choice

    Users may now access the resource How to Protect Trade Secrets When Employing a Mobile Workforce and Telecommuters. In addition, a Nondisclosure Agreement With Return of Materials Provisions form has been added to the Policies and Documents Tool.

  • Nondisclosure Agreement With Return of Materials Provisions

    Type:
    Policies and Documents

    An employer may use this form agreement to protect against the dissemination of trade secrets and other employer property. This form should be used when an employee is initially hired within an organization, and steps should be taken to ensure that new and existing employees understand their responsibilities to maintain the confidentiality of the employer's business information.

  • Financial Services Resource Center for HR: Restrictive Covenants

    Date:
    28 June 2013
    Type:
    Editor's Choice

    XpertHR's Financial Services Resource Center for HR helps financial services employers handle their most challenging employment issues by bringing relevant resources together in one place for easy access.

  • New Content Added on Restrictive Covenants

    Date:
    01 May 2013
    Type:
    Editor's Choice

    XpertHR had added certifications that employers should provide to new hires to ensure that they are not subject to any restrictions on competition or subject to an agreement that would prevent them from using the confidential information of a former employer. The Terms of Employment section of the Employment Law Manual also now includes a discussion on obtaining these certifications at or prior to hiring.

  • High-Tech/Software and Communications Resource Center for HR: Restrictive Covenants

    Date:
    16 April 2013
    Type:
    Editor's Choice

    XpertHR's High-Tech Resource Center for HR: Restrictive Covenants helps high-tech employers handle their most challenging employment issues by bringing relevant resources together in one place for easy access.

  • Do Not Underestimate the Power of a Restrictive Covenant!

    Date:
    18 January 2013
    Type:
    News

    A federal district court's ruling in Indiana reinforces the effectiveness of restrictive covenants to protect an employer's competitive edge in its industry.

  • Nondisclosure Agreement Form

    Type:
    Policies and Documents

    An employer may use this form to protect non-public business information, trade secrets and confidential and proprietary information from being released by employees. An employer should require all new hires to sign Nondisclosure Agreements, also known as Confidentiality Agreements.

  • New Federal Law Increases Penalties for Trade Secret Theft That Benefits Foreign Governments

    Date:
    16 January 2013
    Type:
    News

    On January 14, 2013, President Obama signed the Foreign and Economic Espionage Penalty Enhancement Act of 2012. The new amendments to the Economic Espionage Act of 1996 (EEA) increase existing penalties for trade secret theft.