We live in the information age and for many employees, what they know is just as important as what they do. It’s no surprise, then, that an increasing number of companies require that employees sign an agreement not to share business information, both during and after their employment.
To be effective, the wording of these documents has to precise. Every line matters, except for one—the title. It doesn’t matter whether you call it a Confidentiality Agreement, a Non-Disclosure Agreement or simply an NDA. They all do the same thing: protect valuable company information.
Why Non-Disclosure Agreements are Necessary
There are a lot of reasons why a business may decide to create confidentiality agreements for employees to sign. A company isn’t made up just of its premises, its product and its workforce—information is less tangible but often just as important. And for that information to have value, it must be kept confidential.
You’ll want to prevent dissatisfied employees accepting an offer from a rival or setting up shop on their own, seeking to gain from your proprietary data. Of course, not all information is proprietary. Employees can expect to learn skills and important lessons at your company and to use these during their career, so it’s important to make clear to employees exactly what is and isn’t private.
Depending on your industry, proprietary information could mean specific inventions or more general information like customer lists, product roadmaps or financial data. If a rival company were to have access to all this information, it could prove fatal to your ability to compete.
Lastly, it’s just good practice. Even if you don’t have any specific trade secrets in mind that must be guarded, these may arise in future and you want to be prepared in advance.
How to Write a Non-Disclosure Agreement
While writing a non-disclosure agreement from scratch without the help of a lawyer isn’t advisable (that’s why we’re offering a downloadable template) but there is some general guidance to bear in mind.
- Be Specific on What Information is Confidential
For an NDA to work, the language has to be precise. If there’s any wiggle room, the agreement won’t be worth the paper it’s written on. That means listing precisely what information is and isn’t private—you’ll want to list specific items but include general clauses that encompass all possible sensitive company data.
- List Exceptions
Not everything discussed within an organization can be kept confidential. This typically includes information learned from third-party sources, in the public domain or known by the employee prior to the signing of the non-disclosure agreement. (For this reason it’s good to get employees to sign before you are sure you have a reason to.)
- Include a Non-Compete Clause
Non-disclosure agreements tend to also restrict the future ability of employees to work for rivals. While the necessity of this is obvious, agreements cannot ban employees on working within an industry ever again—this agreement would not stand up in court. Instead, it’s common to include a certain time period after employment has ended that an employee cannot join a rival. It may also be possible to include a geographical radius.
- Define Roles
Be careful to edit non-disclosure agreements for non-typical employee circumstances. If a worker is technically an independent contractor, or is a business with employees themselves, the restrictions may not apply in the same manner.
Get Non-Disclosure Agreement Template
Businesses can’t afford to get non-disclosure agreements wrong. To help, Paycor is providing a Confidentially Agreement template.
Once downloaded, the text can be customized to the needs of your organization.