A non-disclosure agreement (NDA) is a legal contract between multiple parties designed to protect sensitive information or materials from getting shared or disclosed to other unwanted parties. Many businesses and companies will have their employees sign an NDA so the company can freely share information within their network without worrying about leaked information. But employees may be at risk if they don't know what they're getting into. To help, here are five things you should know before signing an NDA.
As a rule, the NDA should be explicitly clear about its intentions and requirements. However, some companies find it easier to write vague NDAs, so be sure to ask to have the document modified before signing if unclear. The NDA should stipulate what kind of information you'll need to keep secret, such as trade secrets, purchase records, or other confidential categories of information. The contract should also tell you the steps to take to keep this information safe, whether shredded, locked in a filing cabinet, or with controlled access.
One of the biggest red flags you should look for before signing is an overly harsh punishment for breaching the contract. The typical consequences of breaching an NDA are paying for consequential or punitive damages if a court deems the action intentional and malicious. However, suppose you see a liquidated damages provision in the contract. In that case, you may owe the company a specific payment amount without them having to prove that it was your fault. But a liquidated damage provision is only enforceable if the amount is reasonable compared to the damage.
If an NDA’s effective date and disclosure period seem unreasonable compared to what you are protecting, you may be putting yourself at risk. However, some provisions are perpetually enforceable, meaning they last forever. For example, trade secrets may be perpetually enforceable to protect a company's assets.
There may come a time when you may need to share confidential information, especially in a profession where the legal system is or can become involved. Typically, an NDA should specify that you can share information already known to a recipient, public domain information, or independent information. If these exclusions are not stipulated, you can ask the company to add them to the contract before signing.
Ultimately, and as previously mentioned, the language in an NDA should be explicitly clear. If the provisions in an NDA are vague, unclear, or too general, do not sign unless you can negotiate the terms. While you may not win on every point, you're putting yourself at risk of liability if an NDA is unclear, and you may accidentally share confidential information.
Keeping these five things in mind before signing an NDA can protect you from unnecessary liability and litigation. And if you're compelled to share critical information but don't know whether you're protected, contact civil rights attorney Tamara N. Holder to get the legal representation you deserve.