Table of Contents
Introduction
An employee non-disclosure agreement is one of the most common types of unilateral NDA and is certainly an important one as well. These are naturally used in all professional workspaces, and therefore, it is important to understand how to effectively tailor an NDA for your employees. This article will explore the key components, and best practices, provide a sample template, and offer an example NDA which you can use to sign with your employees.
Key Components of an Employee NDA
When writing a non-disclosure agreement (NDA) for an employee, it’s important to include specific clauses and key components to protect your company’s confidential information and interests. Here are some essential things to consider:
- Who’s involved: Clearly identify the company (the one giving the information) and the employee (the one getting the information).
- What’s confidential: Define what confidential information is, such as trade secrets, proprietary data, business strategies, customer lists, and any other sensitive information that employees may see during their employment.
- Employee’s responsibilities: Spell out the employee’s obligations, such as keeping the information confidential, not using it for personal gain, and returning or destroying confidential materials when they leave the company.
- When the employee can disclose confidential information: Describe any circumstances under which the employee is allowed to disclose confidential information, such as when required by law or with the company’s written consent.
- How long the NDA lasts: Define how long the NDA stays in effect and the conditions under which it can be terminated, such as when the employee leaves the company.
- Which laws apply: Specify the state or country whose laws will govern the agreement and where any legal disputes will be resolved.
- Non-compete and non-solicitation clauses: If you want to restrict the employee from working for competitors or soliciting your company’s clients or employees, include these clauses in the NDA.
- Returning materials: Address the return or destruction of all confidential materials, documents, or data when the employee leaves the company.
- Boilerplate Clause: Include standard legal provisions commonly found in contracts, ensuring consistency and clarity. These clauses cover issues such as the entire agreement, the governing law, and dispute resolution.
- What happens if the employee breaks the NDA: Clearly state the consequences of breaching the NDA, which may include legal action, injunctive relief, and financial damages.
- Severability: Include a clause that states if any part of the NDA is found to be unenforceable, the rest of the agreement remains in effect.
- Integration: Include a provision that the NDA is the entire agreement between the parties and supersedes any prior agreements or understandings, except as otherwise explicitly noted.
- How to give notice: Define how and where notices should be sent in case either party needs to communicate regarding the NDA.
- Employee’s right to legal counsel: State that the employee has the right to consult with a lawyer before signing the NDA.
- Schedule of attached documents: If there are specific documents or materials related to the NDA (e.g. a list of trade secrets), reference them in a separate schedule attached to the agreement.
It’s important to tailor the NDA to your specific needs or refer to a well-drafted template made by experts to make sure it complies with all relevant laws and regulations.
Best Practices for Using NDA for Employees
While drafting and signing an NDA for employees, a few things can be considered which are detailed below:
- When to use an NDA:
Employers should think about using an NDA at the beginning of an employee’s job or at any other time when the employee gets access to confidential information. It should also be reviewed and updated if an employee’s job title, department, or access to sensitive data changes.
2. Customization is key:
NDAs should be tailored to the specific needs of the company and the employee’s job role. Avoid using a one-size-fits-all approach and tailor the NDA to the situation. Different employees may have different levels of access to confidential data, and the NDA should reflect this.
3. Understanding is vital:
Both employers and employees should fully understand the terms of the NDA. Any questions or concerns should be addressed before signing. Employees should be aware of their obligations and the possible consequences of not following the rules.
4. Whistleblower protections:
Consider including provisions that protect employees who report illegal or unethical activities, so they’re not penalized for doing the right thing.
5. Non-compete and non-solicitation clauses:
Clearly define any non-compete or non-solicitation clauses to avoid misunderstandings and disputes. Make sure these clauses are reasonable in scope and duration.
6. Periodic review:
Review and update NDAs periodically to make sure they’re still relevant and effective. As business conditions and employee roles change, the NDA should change too.
Sample
Effective Date: [Effective Date]
Location: [City, State]
Parties
Employer Name: [Company Name]
Current Address: [Company Address]
Identifier: [Company Identifier]
Expression Includes: Successors, assigns, and affiliates
Employee
Name: [Employee Name]
Current Address: [Employee Address]
Identifier: [Employee Identifier]
Expression Includes: Successors, assigns, and affiliates
Purpose of Employee Non-Disclosure Agreement
The Employer and the Employee (collectively, the “Parties”) are entering into an employment relationship where the Employee will have access to and be entrusted with certain confidential and proprietary information of the Employer. This agreement is intended to safeguard the confidentiality of such information.
Definition of Employee-Specific Confidential Information
For the purposes of this Agreement, “Employee-Specific Confidential Information” includes, but is not limited to:
1. Trade secrets, business plans, and intellectual property.
2. Information related to the Employer’s operations or clients.
3. Any other information recognized as confidential in the context of the employment relationship.
Exceptions: Employee-Specific Confidential Information
Employee-Specific Confidential Information does not include information that was already known, publicly available, or independently developed.
Non-Disclosure Obligations for Employee
The Employee must not disclose, reproduce, or distribute Employee-Specific Confidential Information except in connection with their duties as an employee of the Employer.
Protection of Employee-Specific Confidential Information
Both Parties must protect the confidentiality of Employee-Specific Confidential Information and take reasonable measures to prevent unauthorized disclosure or use.
Ownership of Employee-Specific Confidential Information
Employee-specific confidential Information remains the property of the Employer and cannot be copied or reproduced without prior written consent.
Return or Destruction of Employee-Specific Confidential Information
Upon termination of employment, the Employee must return or destroy all Employee-Specific Confidential Information provided by the Employer.
Limited Disclosure to Employee’s Advisors
The Employee may disclose Employee-Specific Confidential Information only to their advisors, consultants, or legal representatives on a need-to-know basis, provided they sign appropriate confidentiality agreements.
Legal Process and Disclosure
In case of legal requests for disclosure of Employee-Specific Confidential Information, the Employee must promptly notify the Employer and cooperate as necessary.
Use of Names and Trademarks
The Employee shall not use the Employer’s name, trademarks, or proprietary information without prior written approval.
Injunctive Relief
Both Parties acknowledge the unique nature of this Agreement and agree to injunctive relief in case of violations.
Indemnification
The Employee shall indemnify the Employer for costs incurred due to any Agreement breaches.
Limitation of Liability
Neither Party shall be liable for certain types of damages.
Voluntary Disclosure
Both Parties reserve the right to disclose only necessary information related to the employment relationship.
Term and Termination
This Agreement is effective from the date of execution by both Parties and continues until the employment relationship is terminated.
Authorization
The Parties warrant that they have the authority to enter into this Agreement.
Severability
If any provision is found invalid, the rest of the Agreement remains in effect.
Counterparts
This Agreement can be executed in multiple counterparts.
Relationship of Parties
The Parties have an employer-to-employee relationship.
Governing Law and Jurisdiction
This Agreement is governed by the laws of [State] and subject to the exclusive jurisdiction of the courts in [State].
No Oral Agreements
Modifications and amendments must be in writing.
No Assignment
The Agreement cannot be assigned without written consent.
IN WITNESS WHEREOF, the Parties have executed this Employee-Specific Non-Disclosure Agreement.
Company Signatures: [Company Representative Name]
Employee Signatures: [Employee Name]
Conclusion
Non-disclosure agreements (NDAs) are important for protecting a company’s confidential information. They help build trust and keep trade secrets safe, but they should also be fair to employees.
Tailor NDAs to each employee’s role and responsibilities, and offer them legal counsel before they sign. Regularly review and update NDAs to make sure they’re still relevant and effective.
NDAs should protect your business, but they should also create a safe environment for employees. This balance ensures that confidential data is protected while also respecting everyone’s rights and interests.
Always seek legal advice to make sure your NDAs comply with all relevant laws and regulations.