There will come a time in your career when your employer will require you to sign an NDA to protect the business’ trade secrets. Sometimes, it may come up even sooner – like say during your interview, when you have hardly hard time to analyze the details. Don’t worry, this is a common business practice. Next time you are asked to sign a non-disclosure agreement, here are the 7 things to consider and lookout for in order to avoid future troubles, long-term commitments and even legal proceedings.
What is Non-Disclosure Agreement (NDA)?
An NDA is a written document that establishes a confidential and legally binding relationship between two or more parties, contains information that all parties consider confidential, and prohibits the other party from disclosing such information to anyone else.
Employers usually require employees to sign Non-Disclosure Agreements because this allows the company to work at a higher level and with lower risk. A functional confidentiality agreement is a catalyst for the free flow of sensitive information within an organization, which is critical to maximizing the bottom line and efficiency of the business…without any fear of exposure or leaked trade secrets. Such confidential and proprietary information that companies often want to keep secret includes; customer lists, technology, ownership, marketing & design strategies, and various other business secrets. Know that your employer will not ask you to sign a non-disclosure agreement because of suspicion, but you will sign one because it is essential to the smooth and efficient operation of your company.
If you are a general office worker or IT professional at say Deloitte, you may need to sign a non-disclosure agreement. So next time you receive an NDA, calm yourself down and be ready to discuss it analytically, ensuring that your interests are protected.
7 Things to Consider Before Signing
- Pay attention to general and vague language: When analysing a confidential agreement, you want to make sure any information in that document labelled as “confidential and proprietary information” are very clearly defined to the best of your understanding. Be suspicious of any vague or broad terms that unreasonably restricts your ability to discuss and disclose information. Make sure these 4 types of information in your NDA are excluded to allow yourself better protection:
- Public information
- Any information you can prove you acquired outside of the information defined in your company’s NDA.
- Third party information
- Information you already know of or can obtain yourself
- Understand the scope of the NDA: Consider what the document requires you to keep confidential and for exactly how long. What is expected of you to keep that information confidential? What types of information are you not allowed to disclose? And how long after leaving the company are you expected to still keep this information confidential? These are things that MUST be very clearly stated in the document.
- Consequences of violating the NDA: Beware of unusually severe or unfair penalties for violating the confidentiality agreement. Consider how the punishment holds up to the violation and if the punishment far exceeds the crime, do not sign. You also need to make sure that the NDA terms are balanced for both parties. Stay away from non-disclosure agreements that require you to be responsible for the misconduct of third parties (including your colleagues and other employees) without balancing the scale on the company’s side as well.
- The timing for signing an NDA is critical: A basic and integral rule of all contracts is that both or all parties involved must agree on the value of that contract. Almost always, employers will ask you to sign an NDA ON or BEFORE you start working with them – which usually will be enough to be the main consideration for the NDA. Timing issue becomes a critical one when you are asked to sign the NDA AFTER you have already joined the company. If this is the case, you should qualify for a “new” consideration based on what you know, what you’ve divulged previously and what the NDA should mark as the starting point of your agreement… this is usually common when an NDA comes up due to a promotion.
- Liquidated and Ascertained Damages (LAD): If this is included in your NDA, run, just run and do not look back. A confidentiality agreement where a compensation clause entitles your employer to a certain amount of damage, without them having to prove you are the direct cause of the violation is a bad one for you. Most LAD claim provisions restrict and run counter to government policy –which should tell you everything you need to know. Do not give your employer an automatic refund for something you might not even have done.
- If needed, negotiate your NDA: “A good compromise is one where both parties are dissatisfied.” – Larry David.
If you think something is unfair or inappropriate in the NDA, don’t be afraid to ask for a modification or change of terms. It doesn’t hurt to ask and it’s most certainly safer to ask and know than to saddle yourself with something you cannot get out of later – plus employers have been known to make more allowance for last minute or surprise changes to NDAs. With any good contract, there should be fairness and balance for both parties. Ask for clarification and explanation of any issues that bother you about the terms of the agreement. - Let your gut instincts guide you: If some aspect of the non-disclosure agreement doesn’t sit well with you or is downright suspicious, it probably is. It may seem inconvenient to have a lawyer review your NDA before you sign, but this is nothing when compared to the costs and troubles you may incur in the future. A little money spent now on a lawyer can save you years of difficulties, stress, and even litigation. And if the NDA seems too harsh or suspicious, there is nothing wrong with abandoning the NDA altogether.
NDAs are essential for any employer who wants to protect their proprietary and confidential information. This is all well and good but as an individual working for a company, you want to make sure you protect yourself before signing any NDA that might end up holding you responsible for information you mistakenly revealed over a decade and 2 jobs ago. NDA’s are also not just there as traps for you as an employee, so no need to fear them without examining what they entail. So next time you find yourself face-to-face with an NDA, the above 7 tips will help you better protect your financial and legal future.