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All About Non-Disclosure Agreements

Posted on by Dawna M. Roberts in LawFebruary 05, 2021

Non-Disclosure Agreements

If you have a job or business, you have probably heard about a non-disclosure agreement, but not everyone knows what they are and what they do. Read on to learn all about non-disclosure agreements. Chances are that at some time during your work life, you probably signed one without even knowing it.

What is the Meaning of a Non-disclosure Agreement?

A non-disclosure agreement (NDA) is a legally binding document that protects the owner from employees or others from spilling trade secrets or divulging details about anything that happens. Sometimes during the course of a job, employees are exposed to information that is sensitive or private in nature, and the NDA dictates that they cannot talk about these issues anywhere outside of the office.

However, non-disclosure agreements do not protect against a whistleblower’s actions if it pertains to a matter of safety or illegal activity.

It is very common for high-tech firms, consultancies, or other companies to demand that new employees sign an NDA before being hired. The reason is they may have proprietary information about products or services that they do not want to fall into the hands of competitors. When a company like Apple guards its new product releases carefully, wants to protect its own privacy, an NDA comes into play.

NDAs are common in the private sector and very popular among government agencies, the military, and even the White House. The basic premise of an NDA is that it is a contract between all parties to keep private information secret. 

What Is an NDA They Used For?

What Is an NDA Used For?

When someone comes up with a great idea for a new product, they do not want someone else stealing their idea and bringing it to market before they have a chance to launch theirs. Therefore, anyone involved with the product from vendors, suppliers, employees, and even clients may have to sign an NDA until the word is out.

Famous people (even Donald Trump) have people around them sign NDAs so that the personal details of their lives are not splashed across the daily headlines. Actresses and actors do this often. Sometimes they do this to protect themselves from being labeled by the public for overhearing an off-color joke or something offensive meant only for the private party to whom they were talking.

Unfortunately, this practice can be taken too far. Victims of Harvey Weinstein (the Hollywood producer accused and convicted of sexually assaulting a bunch of women in the industry) had these women sign NDAs so they could not expose him. However, in the end, these NDAs did not hold up in court, and Hollywood and the public ostracized him.

How Does an NDA Work?

Typically, when you sign an NDA, you agree to keep quiet about a specific something or everything for a specific amount of time (usually years or months). Some NDAs refer to intellectual property rights, and those also may expire after a specific period. 

Some examples of the information kept under wraps through an NDA might be a list of valuable clients that a competitor would love to get their hands on. Another good example might be the financial records of how a private company is doing and their sales figures. Perhaps they have discovered an innovative way to create a product inexpensively or some unique method of delivery services that a competitor would love to steal. 

What an NDA Does Not Cover

Things like the information provided in reports to the SEC or other parts of a public company are not covered under an NDA. Other items may also be excluded, but eventually, it may be up to the courts to decide whether something falls neatly under the cover of an NDA. Illegal activity and secrets that would expose wrongdoing also do not fall under the guise of an NDA, and whistleblowers can violate them if needed for those reasons. 

What if You Violate an NDA?

What if You Violate an NDA?

NDAs are a legally binding contract. If you sign one for a good reason (unlike the Harvey Weinstein example above), and it is enforceable, you could end up in court if you violate it. The person who hired you and had you sign the NDA couldsue you and end up winning, and you might have to pay a considerable fine. Even if you are found not guilty for violating the NDA, or you don’t have to pay any fees, that court case could still end up in public records and show up in a background check. 

Should You Sign an NDA?

The question of whether or not to sign an NDA is entirely up to you. It highly depends on the situation and if you can abide by the rules of it easily and stay within your own moral and ethical code.

Be sure to read over any DNA carefully before signing it so you know what the penalties might be if you decide to violate it later.
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