As new businesses in New York grow, they accumulate two things of considerable worth: employees and information. Employees possess knowledge and skills necessary to carry out the mission of the business. Information provides guidance for employees and executives telling them how to operate in the company’s interests in both the short and long terms. Savvy businessmen understand the worth of these assets and take many steps to protect them. One of the most effective methods of protecting the company’s important information is having employees sign a non-disclosure agreement (“NDA”), yet business owners frequently believe that non-disclosure agreements cannot be enforced. While New York courts generally lean toward protecting a worker’s right to speak and restricting an employer’s right to silence the employee, certain steps are available to the business that can go a long way toward protecting the confidentiality of the company’s critical business information.
Creating an enforceable non-disclosure agreement
An employer’s first step in enforcing a non-disclosure agreement is to ensure that all employees sign such an agreement as soon as practicable after the employee begins working for the company. If the employer waits to long to ask employees for their signatures, a court may rule that the agreement is unenforceable.
The agreement should be drafted by an attorney with experience in employment law and should clearly define what is meant by the term “confidential information.” In most cases, the definition of “confidential information” should be broader than “trade secrets.” (No law prohibits such a definition.) New York has adopted the Uniform Trade Secrets Act, and that statute contains a very broad definition of confidential information. A well-drafted NDA should include trade secret information and other information that is vital to the company’s operations in its definition of confidential information. The employer should bear in mind that the company can reserve the right to identify confidential information, but it must also take care to clearly and specifically identify confidential information as such.
The NDA should also contain a clause that specifies how damages are calculated in the event that the company prevails in the case.
How does an NDA relate to an employment agreement?
Many companies combine employment agreements with their standard NDA. If an employer chooses this kind of agreement, the NDA must also follow the rules for drafting and enforcing the employment agreement. The failure to do so may invalidate the employment agreement.
Any employee who is threatened with enforcement of an NDA should consult an attorney who is experienced in both enforcing and challenging such agreements. A knowledgeable attorney can analyze the agreement to determine if it is enforceable under New York statutory law and court decisions and can also provide an opinion about the likelihood of prevailing in the law suit.