Nondisclosure agreements grow in popularity

Posted by Charles Middleton on 10/05/2018

Q: What are NDAs and when are they best utilized?

A: A nondisclosure agreement (NDA) is a contract in which the parties agree to keep certain information confidential. They're used in hope of preventing the disclosure of confidential or proprietary information. On the business side, they may be used to facilitate disclosure in an acquisition. On the litigation side, they may be used to prevent the disclosure of a settlement or the reasons for the settlement.

Q: Is there anything of note to learn from the latest NDAs used by President Donald Trump to work in the White House?

A: It has become more common to ask employees to sign NDAs, at least in private businesses. Employees have access to all kinds of information that they need to keep confidential, such as customer and supplier information and proprietary technology. With this in mind, employers need to think carefully about the information they can and want to protect. They also need to realize there are some kinds of information that they're simply not allowed to keep confidential. For example, both the Equal Employment Opportunity Commission and the Securities and Exchange Commission take the position that there's certain information that you can't prevent from being disclosed. Employers also need to think through, in advance, how to enforce the agreement. An agreement that can't be enforced or that you are embarrassed to enforce is not much help, and an agreement that isn't signed is no help at all.

Q: What legal pitfalls should be considered?

A: NDAs aren't “one size fits all.” As an employer, you need to define carefully the covered and the excluded information and whether it can legally be protected. You may want to address advance notices of legally required disclosure to give yourself a chance to protect your rights. You also will need to address the consequences of a breach, deliberate or inadvertent, and the manner of enforcement.

PAULA BURKES, BUSINESS WRITER

Published The Oklahoman, October 4, 2018