Many businesses and employers use confidentiality agreements to protect secret information from getting into the hands of their competitors or used by former employees or business partners. The agreement basically states that the receiving party will not disclose protected information or attempt to use the information to his economic benefit.
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Confidentiality agreements, or nondisclosure agreements (NDA), safeguard against the dissemination or exploitation of trade secrets, or invaluable information not known outside an organisation, that give a company a competitive advantage. Key employees sign these agreements as a condition of hire and may not think about the consequences to their careers. Often they have no choice but to sign the contract, since the employer typically has the advantage; refusal to sign generally means the employee doesn't get hired.
The clauses contained in most confidentiality agreements may include a definition of the secret information. The contract usually outlines the obligation the party receiving the information has and the duration the agreement covers. Parties typically add other provisions to the contract, such as remedies for breach of the contract or arbitration or payment of legal fees.
Courts have continually ruled confidentiality and agreements that curtail the basic rights and freedoms of an employee to work for competitors as too broad.
Breaking an enforceable confidentiality agreement, otherwise called a " breach of contract," may involve a variety of possible remedies. Depending on the type of violation, the plaintiff may go into court and obtain a preliminary injunction. Legal remedies may also include significant penalties and damages.
In some cases, an individual can break a confidentiality agreement written in broad terms, such as when the National Labor Relations Board (NLRB) ruled against Northeastern Land Services (NLS), Ltd. The party to the complaint, Jamison Dupuy, believed he did not receive proper compensation and reimbursement for expenses. He broke the confidentiality agreement that prohibited him revealing the terms of his employment contract, including pay and other provisions, to other parties.
NLS did not resolve Dupuy's complaints, so he went to the client, an El Paso Energy project manager, and the employment agency terminated him. The NLRB ruled that the non-union temporary employment agency could not stop temporary workers from discussing their compensation although they had signed confidentiality agreements.
California business litigation attorney Marisa Marsh states that an employer can protect its trade secrets with a confidentiality agreement, but should not have employees sign nondisclosure agreements that represent public or industry knowledge. For example, a client list published on the company's website or elsewhere on the internet does not fit the definition of "confidential information."
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