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The case against nondisclosure agreements

Businesses that deal in products where intellectual property is key often require all employees (and sometimes even people who interview for jobs) to sign a nondisclosure agreement (NDA). These documents bind the parties who sign them from disclosing or misusing confidential information they become privy to as part of their work.

While an NDA is often one of the first documents placed in front of a new hire, there are potential disadvantages to business owners who do that. These disadvantages are worth considering.

It can be seen as a sign of distrust

Employees who aren't very familiar with NDAs and have never been asked to sign one may see it as a signal that you don't trust them. This perceived lack of trust can negatively impact their loyalty, which is an important thing for companies to have from their employees.

It may be unnecessary

All positions may not require an NDA. However, sometimes employers require everyone to sign them. As long as the people who have access to confidential information have signed NDAs and you have procedures and policies to protect that information from being accessed by others, you may not need to ask all employees to sign them.

You don't have the resources to enforce your NDAs

If you lack the money and/or inclination to sue people who violate an NDA and don't follow through on violations, employees will be less likely to respect them. It may be a better use of your energy and resources to take steps to protect confidential information and to ingrain in your team how crucial confidentiality is to your company's survival and success.

An NDA requirement may prevent you from getting the best talent

Many employees eventually plan to go into business for themselves. If they're concerned that they won't be able to use the knowledge or ideas they've accumulated from working for you without being sued, they may go somewhere else. Further, if they are prevented from later seeking a better opportunity within the same industry because of a noncompete clause, they may be reluctant to accept a position with you.

Obviously, every company is different. NDAs may be a requirement for all employees. Whether all of your employees sign them or they're used sparingly, it's essential to ensure that they're correctly drafted and current. If they aren't, they may not be enforceable. An experienced North Carolina attorney can provide essential guidance.

Source: EveryNDA, "5 Reasons Not to Sign an NDA with New Hires," Aileene Koh, accessed April 20, 2018

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