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Do’s and Don’ts of Nondisclosure Agreements in Employee Contracts

Businesses have a legitimate need to protect their trade secrets and intellectual property. An effective way to do that is to require employees and independent contractors to sign a nondisclosure agreement (NDA), forbidding the sharing of confidential information with competitors. While NDAs are generally legal in Florida, courts tend to scrutinize them carefully and will only uphold NDAs that do not amount to unreasonable restraints of trade.

A nondisclosure agreement can cover a wide range of confidential information, such as:

  • Trademarks, patents and prototypes
  • Customer data
  • Marketing strategies
  • Proprietary research and data
  • Software programs

No matter what information your NDA covers, courts may view it as a restraint of trade. Such restraints are generally disfavored, which is why the agreement must be detailed and narrow in scope. A well-drafted NDA will include all of the following:

  1. Clear definition of what is covered — The NDA must specify the types of information it covers. Florida courts will not enforce vague or overly broad language.
  2. Time limit — The duration of your NDA will depend on your needs, but it’s a good idea to include an expiration date. Courts often view indefinite durations as too restrictive.
  3. Survival clause — This clause defines how long the confidentiality obligation remains in place after the employment relationship ends. The obligation will often survive an additional year or two.
  4. Returning or destroying information — Be specific about what you expect the employee to do with an documents, records, digital files or other information once employment ends. A vague instruction to “delete or destroy all material” may be too broad.
  5. Remedies for breach — The NDA should set forth your right to relief if confidential data is divulged. Some type of monetary compensation is common, though injunctive relief could be preferable in some cases. The remedy should not be overly harsh, since a court may consider it a penalty and not enforce it.

When considering nondisclosure agreements, you may also want to create or revise related contracts, including:

  • Nonsolicitation agreements — These prohibit current and former employees from steering away your existing workers, clients, and customers into a related business opportunity.
  • Noncompete agreements — These prevent departing employees from working for a competitor or opening their own shop for a designated amount of time after leaving.

Drafting a legally enforceable NDA is a task requiring skill and knowledge of the subject matter involved. Whether you want an NDA covering employees or independent contractors, H. Clay Parker, Esq. can help you craft an NDA that accomplishes your goals. Call our Orlando office at 407-216-2504 or contact us online to schedule an initial consultation.

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