People change jobs for any number of reasons. When an employee departs, they can take more than just their skills. Many employees have obtained valuable insider information from their previous company and this information in the hands of a competitor or other third party could be very detrimental. Therefore, having an employee sign a properly drafted non-disclosure agreement (NDA) before they begin working can protect your business down the road.
An NDA can serve as a form of insurance for business owners and is implemented to protect a company’s “trade secrets.” Trade secrets are important information (i.e. customer lists, processes, inventions, formulas, etc.) which, if leaked to third parties, can result in numerous negative ramifications. Competitors may pressure former employees to divulge this information but a properly drafted NDA can provide injunctive relief and monetary damages to an aggrieved business if the terms of an NDA are violated. NDA’s should be drafted broadly to include essentially all information an employee acquires while employed.
NDA’s contrast with non-compete agreements where an employee generally agrees not to work for a competitor for a set period of time after leaving his previous employer. While many businesses require their employees to sign them, non-compete agreements are generally unenforceable in California even with employee consent.
If your business is in need of a properly drafted NDA or other important agreement, it is best to have them drafted by an attorney with substantial experience in this area.