What Makes a Non-Disclosure Agreement Unenforceable?

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What Makes a Non-Disclosure Agreement Unenforceable?

A non-disclosure agreement is a type of restrictive covenant that employers often use as a condition of hiring employees. This type of agreement restricts an employee’s use of company information, which is often sensitive or confidential, both during and after his or her employment with the company. From an employer’s perspective, a non-disclosure agreement protects the business by preventing an employee from sharing the company’s confidential information gained from his or her employment with the business. This could occur if the employee leaves the business and attempts to open his or her own competing business, or if the employee leaves and goes to work for a business competitor.

Typically, a non-disclosure agreement specifically outlines what the employer believes is confidential or exclusive to the business, whether it be a list of customers, particular business strategies, or specialized knowledge that could potentially give a competing business an advantage. In a non-disclosure agreement, an employee typically cannot disclose or share any of the information outlined in the agreement, whether the employee is still employed with the business or not.

Non-disclosure agreements tend to be favored by courts, in that they don’t restrict an employee from job or business opportunities in the same industry. Nothing in a non-disclosure agreement should prohibit an employee from leaving a company and starting his or her own competing business, or from going to work for a competitor. If a non-disclosure agreement contained such a provision, the court would tend to look less favorably upon it, as it would be more akin to a non-compete clause in an employment contract.

A court may be reluctant to enforce a non-disclosure agreement, however, if it is overly broad. There is some industry-specific knowledge that an employee would normally obtain just from working in that particular industry, or from the education needed to work in that industry. A non-disclosure agreement cannot restrict an employee from later using or sharing that type of knowledge. To prohibit an employee from doing so would effectively shut him or her out of working in the same industry in the future. A court may see such an agreement as overly broad. In order to remain enforceable, a non-disclosure agreement should be narrowly tailored to encompass only confidential knowledge, trade secrets, or customer information that the employee only could have gained through his or her employment with that company.

When you are involved in any type of business dispute, a skilled and experienced trial attorney is essential, even if the case does not go to trial. Williams Mestaz, L.L.P., provides strong legal advocacy for employers involved in business disputes, including disputes concerning non-disclosure agreements. We are known for using our skills, experienced, and cutting-edge technology to get great results, whether after trial or through a favorable settlement. Call us today at (602) 256-9400 and schedule an appointment to meet with us about your case.

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