Many remember how Elizabeth Warren took Michael Bloomberg to task over his company’s use of non-disclosure agreements (NDAs) during one of the 2020 presidential debates. Warren alleged that his company used NDAs to cover up the unfair treatment of three women executives. It was a keynote moment for her candidacy and a knockout punch to the Bloomberg campaign, who released the women from their NDAs the following day.
Headlines aside, these agreements are an essential part of many business relationships. These documents can protect proprietary information, company secrets or intellectual property shared with employees, vendors, business partners or others structuring deals. This legal handshake helps provide strong foundational guidelines for business partnerships, and it outlines potential legal action for those who violate the agreement.
Companies want to protect information because they believe it gives them an advantage in the marketplace. Examples include:
- New products and services
- Client information and sales contracts
- Manufacturing procedures
- Secret formulas, special sauces and unique recipes
- The company’s non-public accounting
NDAs do not cover everything
It is important to note that NDAs are not legally binding if the information hides illegal activity. Nor are they used to protect information that is common knowledge. Former employees or partners also need not worry about disclosing any information they learned before or after the terms of the contract or anything learned while employed that was outside the scope of their agreement.
Drafting an enforceable NDA
The agreement has the best chance of being enforced when it is not unduly harsh nor so restrictive that it prevents people from seeking new employment in a similar position or field. Nevertheless, these contracts can still address a company’s needs.
Protecting the client
It is in the best interests of those wishing to draft or concerned about signing an NDA to consult with a business law attorney. These legal professionals can better ensure that the agreement serves the client’s best interests. They can also help negotiate a resolution to a dispute or protect the client’s interests when litigation is unavoidable.