Employee Non-Disclosure Agreement (NDA) Template

Employees have access to valuable information, such as sales contacts, recipes and product designs. Employers can use non-disclosure agreements (NDAs) to preserve the confidentiality of this information. An employee NDA template can ensure these contracts are consistent, valid, and enforceable.

What Is an Employee Non-Disclosure Agreement?

Employee NDAs are binding contracts that restrict an employee from disclosing protected information. These agreements are not the same as non-competition agreements.

Non-competition agreements usually block workers from going to work for a competitor. NDAs simply block the worker from talking or writing about the information specified in the contract.

When Should You Use an Employee NDA?

Companies can use employee NDAs with both contractors and at-will employees. In other words, employee NDAs are not limited to contract employees. What is at-will employment? Most people are at-will employees, meaning they have no contract that governs their term, and, as a result, they can be fired for any reason or no reason.

Under employment law, companies can have NDAs with workers to govern the handling of confidential information and trade secrets. These NDAs should be used whenever workers have access to any non-public information.

What to Include in an Employee NDA

An employee NDA must have mutual assent. Specifically, the employee must voluntarily enter into the agreement. Coercion can be an issue due to the power imbalance between workers and their employers. The contract can include a statement that the employee willingly agreed to the terms.

Employee NDAs must also have consideration, which means there is an exchange of value. Consideration is usually not an issue for new hires because the job offer itself is valuable.

However, it can be an issue when having current workers sign new NDAs. One way to address both consideration and mutual assent is to offer existing workers a small bonus or something else in exchange for signing a new NDA.

Most companies that use NDAs will have new hires sign the agreement during onboarding. Generally, accepting an NDA is a condition of employment. In other words, the employer will rescind the job offer if the new worker declines to sign the NDA.

Moreover, the terms of the NDA are usually non-negotiable. Instead, all agreements are derived from the same NDA template customized with the worker’s name and job position.

This uniformity helps the employer enforce the NDA. If all new hires must sign an NDA to join the company, the employer can argue that the worker was not singled out for unfair treatment.

Likewise, if the employer must enforce the NDA, it can argue that the information should be protected because it took reasonable efforts to preserve its secrecy. This factor is required to protect trade secrets in the 48 states that have enacted the Uniform Trade Secrets Act.

Are Employee NDAs Enforceable?

What happens if you break an NDA? An employer can enforce an NDA in court by filing a lawsuit for a contract breach. A breach means that a party violated a substantive term of an agreement. For an employee NDA, a breach will usually occur when the worker discloses protected information orally or in writing.

A breach can occur even if the disclosure is non-public. For example, a worker might face a lawsuit for disclosing the information to a friend or relative. However, the employer’s economic damages will be much smaller for non-commercial disclosures compared to disclosures to its competitor.

However, NDAs are not enforceable in all situations. Many states have acted to limit the use of employee NDAs. Washington has enacted broad restrictions by prohibiting agreements that block employees from reporting discrimination, sexual harassment or wage violations.

Other states, such as Virginia, have created narrower restrictions applying only to cases involving sexual assault or harassment. A judge will refuse to enforce any employee NDA that violates these limitations.

Key Best Practices for Managing Employee NDAs

Best practices for employee NDAs include maintaining a list of positions that have access to confidential information, uniformly requiring workers in those positions to sign NDAs and periodically reviewing the list.

When drafting contracts, consider working with a lawyer to prepare an employee NDA template. The template will ensure that workers sign an agreement that is valid and enforceable.

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