NDAs vs. Confidentiality
Agreements
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Here’s a piece of information we can share: Non-disclosure agreements are becoming increasingly common in the workplace. They’re often a
requirement for employee onboarding and are
baked into severance agreements. Especially in
professional services industries like technology
and finance, employees should expect to be presented with NDAs, which are designed to protect
trade secrets, methodologies, valuable intellectual property and other sources of profit.
As such, NDAs are typically non-negotiable.
“An employee who is given an NDA at the start of
employment would be hard-pressed to object,”
says employment attorney Louis Pechman of
Pechman Law Group. “It’ll raise the red flag with
regard to loyalty.”
But it’s crucial for employees to judge whether
an NDA is fair before signing. It should have
“reasonable time, place and manner restrictions,”
says Mercedes Colwin of Gordon & Rees. Some
NDAs have no expiration date; generally The
Coca-Cola Company protects its recipe for Coke.
But this kind of broad protection isn’t reasonable
for every business owner.
Pechman, who represents clients in the
financial and pharmaceutical industries, says a
good first step for an employer is to figure out
what “can hurt its business and work backwards
from that” when he helps them craft an NDA.
Employers tend to draft their NDAs as specifi-
cally as possible to make them easier to enforce.
Anything too broad, he says, makes employers
look like they’re overreaching when it comes time
for enforcement. Adds Colwin: “NDAs and the
restrictive covenants had a lot more teeth when I
first started practicing than they do now because
the internet has really made a lot of that informa-
tion available to the public.”
As with offer letters, NDAs go hand-in-hand
with severance agreements and any other legal
matters settled between an employer and em-
ployee, such as employment and discrimination
disputes. “The nondisclosure is a material part
of determining money,” says Marjorie Mesidor, a
partner at Phillips & Associates.
Mesidor says the only time a person has negotiating power around an NDA is if they’re not privy
to the information being referenced. And that’s
still a big if. “An organization protecting their IP is
a top priority,” she adds.
Full Disclosure on NDAs
Three employment lawyers walk us through the basics BY AIMÉE GROTH
Mesidor sees more leeway within non-disparage
and confidentiality agreements, which are specific
types of NDAs. In those agreements, both parties
are part of the process and “have a say in the
story.” Confidentiality agreements, for example,
can be amended to allow the signee to discuss
information with certain close contacts, such as a
spouse, attorney or accountant. However, in these
cases, the signee usually still holds all of the risk in
ensuring the information stays private.
To avoid any misunderstanding as to the scope
of an NDA, Pechman advises clients to have a
conversation with their employer as they’re exit-
ing to clarify what the parameters are.
If the situation goes to litigation, Colwin says
states like New York tend to lean in favor of
employees. “The prevailing sentiment is that
employees should have as many opportunities
[as possible],” he says. “The free-market mentality is that they don’t want to see employees are
restrained. Essentially, they don’t want to see the
opportunities for their employability be limited in
EMPLOYMENT
As with any legal matter, read everything
before signing, and assume nothing. “You don’t
want handcuffs on you,” says Colwin. “Look at the
shelf life of the NDA. Can you live with it?”
