Non-disclosure agreements can be an important tool for businesses to protect themselves. Requiring employees to sign these types of agreements can preserve intellectual property and reduce liability exposure. However not all non-disclosure agreements for employees are valid.
In Massachusetts, courts may not enforce an agreement even when the employee who signed it fully understood its terms. Here are a few things that businesses should know in order to draft and use non-disclosure agreements effectively.
Agreements must have a limited purpose
In general, an agreement should not prevent an employee from revealing information that a business would have no reason to protect. An agreement’s terms must serve a legitimate business purpose.
Businesses cannot protect public information
The main utility of non-disclosure agreements is to protect privacy. When people reveal information that is reasonably accessible to the public, it should not constitute a violation of an agreement.
The duration cannot be indefinite
Courts usually consider agreements without a finite duration to be overly burdensome. Agreements should not purport to last longer than reasonably necessary.
There must be consideration
Every type of contractual agreement needs to have some form of consideration. In other words, one party must receive something for signing the agreement. Employees may not necessarily receive consideration for signing a non-disclosure agreement. This is particularly true when businesses request personnel to sign agreements when their employment is terminating.
Businesses need to review the efficacy of non-disclosure agreements carefully. They must also evaluate the significance of an alleged violation before seeking a legal remedy.
