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Should you use nondisclosure agreements in your business?

On Behalf of | Aug 4, 2023 | Business Law

The sensitive information possessed by your business can give you an edge over your competitors. But that information is usually only as valuable as it is secretive. If the information were to be made widely known in the marketplace, your competitors could use it to their advantage, thereby potentially reducing your market share and devaluing the work that you put into developing, generating, or gathering that information.

In many instances, this information is shared by employees, both current and former. Sometimes, these employees are looking for compensation in exchange for the sharing of sensitive information, while in other instances, they’re trying to impress a future employer. Either way, you need to try to prevent this from happening if you want to protect your business.

But how do you do that? One option is to use nondisclosure agreements.

How does a non-disclosure agreement work?

A non-disclosure agreement is a document that’s typically signed by an employee who has access to confidential or otherwise sensitive business information. Once the agreement is signed, the employee is prohibited from disclosing information that they learn, discover, or have access to during the course of their employment. You’ll want to specify what confidential or secretive information is protected by the nondisclosure agreement while still ensuring that the language is broad enough to give you the protection that you need.

How do you create a nondisclosure agreement?

There are two ways that you can go about creating a non-disclosure agreement. The first is to create a freestanding nondisclosure agreement. The terms of this agreement will have to be negotiated, and since it’s a contractual arrangement, you’ll need to provide consideration to the employee in exchange for signing off on the agreement.

Your other option is to roll the nondisclosure agreement into an employment contract. This may be an easier way for you to negotiate the terms of the agreement, as the employee will have other key issues that they’ll want to secure in their favor. In other words, your employee may be more willing to sign a nondisclosure agreement in exchange for their specified salary and benefits.

How to ensure that your nondisclosure agreement is legally valid

Although nondisclosure agreements are legal in Texas, there are some things that you should keep in mind to ensure that you’re staying in line with the law and thereby validly protecting your interests. This includes:

  • Targeting your nondisclosure agreement to protect a legitimate business interest, such as trade secrets and other proprietary information.
  • Ensuring that the nondisclosure agreement is used on employees who actually have access to sensitive information.
  • Putting a timeline on the prohibition on disclosure so that the employee isn’t bound by it indefinitely.
  • Specifying as much as possible the information that’s to be protected by the nondisclosure agreement.
  • Foregoing inclusion of information pertaining to illegal, discriminating or harassing practices in your nondisclosure agreement, as those are increasingly frowned upon by the courts.

There may be other key considerations to take into account as you draft a nondisclosure agreement, so make sure that you have a full understanding of the process and the legalities involved before moving forward.

Know how to protect your business interests

The use of nondisclosure agreements is just one way that you can try to protect your business interests. If you want to take a comprehensive approach, you should keep reading up on the options available to you so that you can implement those practices that you think are right for you and your business. That way, you can move forward confident that you’ve done everything you can to keep your business safe and competitive in the marketplace.