The structure of a nondisclosure agreement

| Jan 20, 2021 | Firm News |

Nondisclosure agreements are a way that businesses attempt to protect their intellectual assets. A Michigan employer may ask its workers to sign nondisclosure agreements (NDAs) to prevent them from sharing trade secrets or other protected business information with others. If an employee covered by an NDA breaches their agreement, they may be held liable to their employer for damages caused by their disclosure.

At the core of NDAs is confidentiality, and employees must have a clear understanding of what is considered confidential before they sign any agreements with their employers. This post will generally discuss what elements should be included in NDAs and how confidentiality can be addressed therein. There is no legal advice contained in this post and readers can contact employment law attorneys for support with their own NDA questions.

The structure of nondisclosure agreements

Like other contracts, NDAs must include certain provisions to be valid. They generally must include offers and acceptances and consideration. They also contain NDA-specific matters that can include:

  • The duration of the NDA
  • The definition of confidentiality that the NDA will adhere to
  • How parties with possession of confidential information can use it

How confidentiality is defined in an NDA can drastically alter the liability and limits an employee will be held to if they allegedly breach their agreement.

Possible penalties for breaching an NDA

An employee can face a number of penalties for breaching an NDA. The exact sanctions that they may face will depend on how their NDA is written. Some of the penalties that can be associated with breaching NDAs include orders to stop using or sharing the allegedly confidential information and paying an employer for their losses from the breached information.

Nondisclosure agreements can be complex and overwhelming for employees. Before signing one, it is a good idea to have an employment law attorney review it for content. Understanding one’s employment contracts is a good step toward protecting their rights.