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March 29, 2024 Employment Law

So You’ve Been Asked to Sign an NDA…

The law around employment contracts is undergoing a period of change. Many common types of employment contract provisions have come under increased legal scrutiny over the past few years, particularly non-compete clauses, which several states have banned. One of the most common types of employment contracts is the Non-Disclosure Agreement (NDA), which many corporate employees and executives are required to sign. If you have been asked to sign an NDA, you should consider having a Richmond executive employment lawyer look it over to ensure that you understand its terms. 

The Purpose of NDAs

NDAs are contracts between two parties (in the context of employment law, an employer and employee) that ensure that certain confidential information will remain confidential. Many employers use them when they know that particular employees will have access to confidential, valuable, and/or sensitive information in the course of their work duties. This could include, for example: 

  • Product plans and upcoming launches
  • Intellectual property, particularly trade secrets
  • Sales and marketing plans
  • Employee and customer data 
  • Company financials 
  • The results of company investigations and audits
  • Research and development activities 
  • Results of experiments 
  • Know-how and negative know-how 

The prohibition on disclosure of insider information is an attempt to prevent it from falling into the wrong hands (i.e., competitors). 

Common Provisions of NDAs

Every NDA is different, and each NDA is typically tailored to address the specific information and unique concerns of the employer using it. That being said, most NDAs tend to incorporate at least the following provisions: 

  • Identification of the parties: Typically the employer, the employee, and any relevant third parties
  • Definition of confidential information: Identifies the information that is to be protected
  • Obligations of the parties: Outlines the manner or specific steps in which the parties are to protect the confidential information  
  • Exclusions: Some NDAs contain express exclusions, such as information that employees must share with third parties within the course of their duties
  • Term: The period for which the confidential information must be kept secret
  • Breach: Outlines the consequences for improper disclosure (often includes liquidated damages provisions) 

What Happens if You Breach an NDA 

Most NDAs are explicit about the penalties for breaching them. Again, while every NDA is different, some consequences that are within the realm of possibility include civil actions for breach of contract, intellectual property infringement (including trade secret misappropriation, which carries criminal penalties in some cases), and breach of fiduciary duty, among others. And even if the company elects not to pursue legal action, termination for breaching an NDA is always on the table. 

Discuss Your NDA With a Richmond Executive Employment Lawyer

Employees high on the corporate ladder typically have access to the most valuable confidential information — and also face the gravest consequences for improperly disclosing it. As such, you should consider discussing your NDA with an experienced attorney to make sure you understand your obligations under it. To get started, please contact a Richmond executive employment lawyer at Pierce / Jewett by calling 804-502-2320 or using our online contact form.