Employee Non-disclosure Agreements

The non-disclosure agreement (“NDA”), also known as a confidentiality agreement, is a common tool used by businesses to protect valuable information that gives them an edge in the marketplace.

In the context of an employer-employee relationship, an NDA is a legal contract that prevents an employee from improper disclosure and/or use of trade secrets. A typical NDA should identify exactly what is confidential and what is not, define how any confidential information may be used, when the agreement will expire, and any remedies that can be pursued if confidentiality is breached (such as the offending party must pay the other’s attorney’s fees).

Companies will sometimes require NDA’s in conjunction with non-compete agreements, which prohibit an employee from using specific skills in the employ of a competitor.

In the case of a violation on an NDA by a current or former employee, the employer may ask a court for injunctive relief preventing the further release of its trade secrets, and may also bring suit for damages. For example, one of Massachusetts’ many biotech companies may want to protect the empirical data it has culled from extensive research and development, a securities firm may want to keep records of important financial transactions private, or a start-up firm may want to keep its new computer chip production process under wraps.

A company must take the proper steps to assure that its confidential information is kept secret. For instance, an employer may want employees to sign an agreement preventing them from revealing clients on its customer list, but could have a tough time enforcing the NDA if the list was available on the its own website.

Information that a company labels “confidential” must actually be confidential. In NDA disputes, Massachusetts courts have ruled in favor of employees when employers have not been able to show that the information they defined as confidential was truly an interest which was worthy of protection.

Not every employee is exposed to important trade secrets, and it is not advisable to have every employee sign one. For instance, employees involved in cleaning, mechanical repairs, transport and/or other non-sensitive areas do not need to sign NDA’s as they should possess no confidential information.

(Conversely, there are other individuals besides employees who must be considered when formulating a confidentiality policy.)
When only one party is making a disclosure it is known as a one-way NDA, such as when an employee promises not to reveal customer lists. A mutual NDA is when both parties make a disclosure, and is more common in business to business dealings.

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For more information on Massachusetts employment law and employee non-disclosure agreements or if you are seeking an employment law attorney in Massachusetts, please contact Barry Scheer. If you prefer, you can also telephone our offices in Boston seven days a week at toll free 866-414-0400.

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