Non-Disclosure Agreements: Protect Your Business

by | 27 Jun, 2017

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As a New England business owner, you understand the importance of protecting your assets. Whether it’s a physical document, a crucial business process, or client information, your records and intellectual business property must be protected.

Non-disclosure agreements are contracts entered into by an employer and employee or a business and client. These contracts signify a mutual understanding that specified information is to be kept confidential. If broken, the parties have grounds for legal recourse. They can be a powerful tool for businesses but must be used carefully and correctly.

Who Can Benefit?

Non-disclosure agreements are handy in many industries. An advertising agency might use one when engaging prospective clients to keep any proposed marketing ideas under wraps. A pharmaceutical company could protect its information when revealing the results of trial drug treatments to potential investors. A tech startup company might use one if discussing their innovative products with consultants or job applicants.

An employer might choose to have a confidentiality agreement with its own employees if they handle sensitive financial data or need to keep secret proprietary information that could benefit a competitor.

Every Rule Has an Exception

There are some circumstances in which non-disclosure agreements do not bind the parties who agree to them. Parties are usually free to disclose abuse of authority or information that if unknown could pose a danger to the public.

Several scope restrictions exist:

    • Safety: If an employee or client feels their safety or that of their colleagues is in danger due to withheld information, they may be allowed to release this information while remaining exempt from legal action.
    • Unlawfulness: Disclosing information tied to illegal activity does not render an employee or client at fault.
  • Time: Most denotes the length of time the contract is valid.

What’s the First Step?

1. Determine Your Needs: To create a non-disclosure agreement, first consider exactly what you’re trying to protect. Does your business deal with sensitive information you feel needs to be kept tightly under wraps? Identify this information first and weigh the options of leaving it unprotected.

2. Create an Outline: Once you’ve elected to create your contract, start crafting a general outline. What information will be protected? What are the consequences of a breach? Make sure all parties involved are represented equally and accurately.

3. Call a Professional: Seek the help of an experienced lawyer or HR advisor who can draft an agreement that will keep your company protected and enable you to continue creating fruitful business partnerships.

Non-disclosure agreements by their very nature infringe upon free-speech rights and free-market principles. In addition, they are often entered into by parties with unequal bargaining power, and so courts tend to view them with skepticism, often construing them in favor of the non-drafting party or holding them as unenforceable agreements that too deeply encroach upon other freedoms.

Companies should examine the laws in their jurisdictions to determine what limits exist, then draft their agreements accordingly. In a well-written agreement, companies gain a powerful tool against the economic forces that threaten to eat away at their foundations. Used the right way, it is an added layer of protection and insurance for your business model, your ideas, efforts, and creations.

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For more on improving your HR department read 5 HR Mistakes Small Businesses Make.

Tom DiSilva
Tom DiSilva has been providing professional human resource services for over 30 years. As the CEO of Navigate PEO, he actively partners with organizations of all sizes in the Greater New England area and across the country to help their businesses grow. He has expertise in HR and Labor Management, offering guidance and support for key areas of business such as negotiations, operations management, employee coaching, and employee benefits design. He is an active member of The Society for Human Resource Management (SHRM), The National Association of Professional Employer Organizations (NAPEO), Professional Association of Co-Employers (PACE), and The American Payroll Association (APA). He is deeply committed to giving back to the community both personally and through Navigate Cares, which provides support for several nonprofit organizations such as the USO, The Boys & Girls Club, and the 3Point Foundation.

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Disclaimer: this article does not represent expert advice and is provided for informational purposes. Please get in touch if you would like expert HR advice.