It is relatively common for businesses to rely on industry secrets in order to gain a competitive edge. One of the ways the businesses protect these secrets is through the use of non-disclosure agreements (NDAs). Whether you’re starting a new job or engaging in work with contractors, there’s a good chance that you will be asked to sign an NDA. This guide will help you better understand NDAs and how they are treated in California law.
What are Non-Disclosure Agreements?
A non-disclosure agreement is a legal contract that prohibits someone from sharing certain confidential information that they acquire. Employers often have workers sign NDAs for a number of different purposes.
- Protect Trade Secrets: This may include product formulas or manufacturing processes.
- Safeguarding Relationships: Employers may wish to protect client lists or contract terms with vendors.
- Business Plans: In many cases, businesses seek to protect business plans and internal strategies.
Having certain information leaked to the public or to competitors can be incredibly damaging for certain businesses. Creating a legal deterrent against this can be quite helpful.
Are NDAs Enforceable in California?
As a general rule, NDAs are typically enforceable within the state of California. However, there are some important exceptions that businesses and workers should be aware of.
- Illegal Activity: NDAs cannot prevent employees from reporting activity they come across that is illegal. Employees have a right to be free from retaliation against whistleblowing.
- Post-Employment Restrictions: California bans most non-compete agreements outright. Any type of NDA that seeks to limit a person’s ability to work after leaving a position would typically face great scrutiny by the courts.
- Silenced No More: California recently passed SB 331, the ‘Silenced No More Act.’ This law prevents NDAs from stopping employees from discussing workplace harassment or discrimination.
If you’re starting a new position, it is important to carefully consider all of the implications of any NDA you may be asked to sign.
What to Look for in an NDA?
An NDA is a legally binding contract that can have major legal and financial implications for the signer. Here are just a few things to pay attention to before signing.
- Scope: Consider carefully the full scope of what is considered “confidential” per the terms of the agreement. If the scope of the agreement is too broad, it may be unenforceable.
- Duration: Take into consideration how long the NDA remains in effect. Most NDAs last for several years or more.
- Penalties: In the event you are found to be in violation of the agreement, what are the potential penalties? Examine any details related to damages or arbitration clauses.
It is also worth considering if there are any exclusions for information that is already public. Failing to carefully consider the terms of an NDA can result in major consequences.
Signing an NDA in California
If you were being asked to sign an NDA in California, there is no need to rush. You have the right to request time to review the documents and carefully consider their contents. This is particularly important if an NDA seems unusually restrictive or punitive in the event of a breach. NDAs can serve a valid purpose, but they may not be used to silence workers or restrict their legal rights.
Have you been asked to sign an NDA in California? Our team of employment law attorneys at The Labor Champ are here to assist you. We are committed to helping workers understand their rights and holding employers accountable for their misconduct. Whether you just have legal questions or are wondering how an NDA could potentially impact your future, we are here for you. You can contact our office anytime at 949-727-9300.
