Chapter 2: Contracts that Define Employment Relationships
Part 1: Examples of Employment Contracts
D: Non-Disclosure Agreement (NDA)
When you work in the tech industry, trade secrets are your bread and butter. For example, say you're a mobile app developer, and you're working on an app that promises to revolutionize mobile device security. You could make a fortune, so long as word doesn't get out about your new product before it's ready to hit the market.
To protect those secrets, you need to use non-disclosure agreements (also called "NDAs" or "confidentiality agreements"). This kind of contract essentially swears parties to secrecy about confidential information (e.g., a sales plan, a list of customers, or programming code). Your NDA ensures that you have legal recourse if someone shares your information with the wrong parties.
Here are the key elements of non-disclosure agreements:
- Definition of Confidential Information. What constitutes protected confidential information. Consider subject matter that is at the heart of your business, such as innovative processes, client lists, or financial information.
- Exclusions from Confidential Information. Information that doesn't need protection. These exceptions are usually based on what the laws have to say. For example, if the receiving party (i.e., the person signing the contract) already knew about something before you disclosed it, it can't be protected by the agreement.
- Obligations of the Receiving Party. Statement that the person signing the contract can only use the confidential information in specific ways. Most state laws prohibit the receiving party from breaching the confidential relationship or inducing others to breach it.
- Time Periods. Establishment of how long the information must remain confidential. In the United States, five years is common, but some companies prefer two or three years.
- Boilerplate Provisions. These are usually included at the end of every agreement (e.g., governing laws, dispute resolution, etc.).
For a sample confidentiality agreement, check out Nolo.com's customizable template.
Next: Part 1E: Examples of Employment Contracts: Non-Compete Agreement