BUILDING SUCCESSFUL BUSINESSES

How can employers get sued over nondisclosure agreements?

| Mar 10, 2021 | Employment Law

Many California companies have their employees sign nondisclosure agreements (NDAs) to keep their trade secrets or any other proprietary information from potentially getting into a competitor’s hands.

Sometimes employers draft NDAs too broadly that can infringe on other employee rights. It’s not uncommon for workers to sue their employers over an NDA that’s too broad in its scope.

What to know about drafting a nondisclosure agreement

Before you lay pen to paper when you draft an NDA, you should apprise yourself of the federal, state and local employment laws and other regulations that you must abide by in running your business. Federal employment laws may, for example, prohibit employers from asking workers to sign NDAs that bar them from disclosing their pay to colleagues — while local or state laws can be even more restrictive.

These regulations spell out the steps that you must take to protect your company’s interests. They may require you to be specific about the trade secret you’re trying to protect before having an employee sign an NDA. The more clearly defined the expectations on both parties, the better.

You might also find that these regulations place limitations on how you treat your employees. You’ll want to familiarize yourself with them so that a judge doesn’t see your NDA as too broad in scope that they nullify it. Take, for example, the Defend Trade Secrets Act. You may initially think that your employee violated your NDA by disclosing your company’s trade secrets; however, this federal legislation may grant them immunity when serving as a whistleblower.

What to know about asking your employees to sign a nondisclosure agreement

NDAs are controversial and can limit your pool of prospective employees — but they are also a necessary tool in many industries. Learning to strike a balance between the needs of your business and the rights of your employees is an essential part of the process. The more you know about the law and your options, the better.