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What is an employee non-disclosure agreement?
A non-disclosure agreement is a legal contract between a company and an employee that prevents the employee from disclosing confidential information to any third party. The purpose of this legal document is to make employees clear that they cannot share confidential or secret information about the company at any time.
If the employee fails to follow the provisions of this agreement, the company can seek monetary damages or compensation for the breach of this agreement.
NDA 101: The complete guide to draft an employee non-disclosure agreement
Every business or organization has confidential or proprietary information that is not generally known to the people outside the organization. However, people inside the organization may receive access to the company’s trade secrets, customer lists, intellectual property, financial information, business strategies, or products to perform their job. Disclosure of such information may cause irreparable damages to the company. To protect such information from being made public, companies or employers use an employee confidentiality agreement or non-disclosure agreement.
What information does NDA protect?
In general, an employee non-disclosure agreement protects any or all of the following confidential information of the company:
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Intellectual Property
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Trade secrets and patent applications
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Business plans, business strategies, marketing plans, and sales forecasts
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Product and service
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Customer information
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Details of clients and suppliers
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Inventions, processes, and discoveries
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Accounting and financial information
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Computer technology
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Software information
When do you need an employee NDA?
When you’re running a company, you want to hire the best talents for the growth of your business. But at the same time, you would not want to risk your confidential information being disclosed to a third party. Therefore, it is very important for you as an employer to sign an NDA while onboarding a new employee. If an NDA is required only for specific roles, then it is necessary to use an NDA during the promotion of an employee as well.
Why do you need an employee NDA?
Here are some reasons why you should ask your employees to sign an NDA:
1. Prevents loss of confidential information
This NDA clearly defines what constitutes confidential information in an employer-employee relationship. Having this provision avoids accidental disclosure especially if the employee terminates their relationship with the company.
2. Helps you retain intellectual property ownership rights
When a person develops an innovation or invention, he holds ownership of that invention or innovation. However, if such inventions happen during an employee’s employment with the company, then the ownership rests with the company.
3. Clarify to employees what information is considered confidential
An employee may not know what data or information within the company is considered confidential. An employee NDA can help you specify the information that an employee needs to keep confidential.
What to include in an employee NDA?
An employee NDA clearly outlines the details you need to safeguard your confidential information. A typical NDA includes the following key elements:
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Parties to the agreement - The agreement should identify and specify the parties included. In unilateral NDA, the party with the confidential information is the Discloser, and the party that receives such information is the Recipient. In an employee NDA, the company is the disclosing party and the employee is the receiving party.
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Definition of confidential information - It is important to list the types of information and materials that are considered confidential. Confidential information may include financial information, pricing information, business strategies, marketing plans, software materials, technical specifications, and other confidential information of both parties.
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Exclusions from confidential information - It is also essential to specify which information is not a piece of confidential information. Any information in the public domain or known to the employee by a third party doesn’t count as confidential information.
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Receiving party’s obligation - This clause restricts the employee from making unauthorized disclosures of confidential information.
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Return of confidential information - When the employee’s term ends with the company, he or she is required to return all the documents, notes, computer disks, or any other materials that might contain confidential information.
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Remedies for breaches - The company may look for remedies if the employee breaches the NDA. Monetary damages cover the loss of the company, resulting from the breach of the agreement. A more effective remedy may be to obtain an injunctive relief that restricts the employee from making any further disclosures.
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Survival of non-disclosure obligations - Confidentiality obligations normally continue even after the NDA has been terminated.
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Waiver - This clause clarifies that if any party fails to exercise any right provided in the agreement, it should not be considered a waiver of other rights.
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Non-compete - It is recommended to include a 'non-compete' clause in an employee NDA. It restricts the employee from entering into any business relationship that is competitive with the company during the term of employment and for a period thereafter.
Revv’s ready-to-use employee non-disclosure agreement template
Your non-disclosure agreement needs to be detailed and specific to protect your confidential information. It should not be filled with legal jargon.
This Employee NDA template from Revv contains the essential and most common provisions required in an employee NDA. This template is fully editable and easy to use. You can also enable the employee to accept and sign the agreement using eSign!
When hiring a new employee, use Revv’s Employee NDA template to secure the proprietary information of your company.