Are Non-Disclosure Agreements Enforceable in California?
Nondisclosure agreements (NDAs), also known as confidentiality agreements, are legal employment contracts that create a confidential relationship between the employer and the employees in order to protect proprietary information or trade secrets. Non-disclosure agreements are more common in business relationships where employees are trusted with sensitive information related to the business that, if the information got out, would negatively impact the business. For some businesses, the most valuable assets they have are their secrets.
The enforceability of nondisclosure agreements varies from state to state, which is why employees need to familiarize themselves with California’s unique nondisclosure agreement and restrictive covenant regulations. In recent years, California law has further restricted nondisclosure agreements and other similar employment contracts, so it is also wise to consider hiring professional legal representation to help you understand the recent changes in the laws.
In California, nondisclosure agreements can protect certain financial, business, or financial-related information, such as secret recipes, chemical formulas, client lists, business plans, unpatented inventions, and product designs. However, whether the NDA is enforceable largely depends upon how it was drafted and its compliance with state laws.
What Are the Legal Requirements for a California Non-Disclosure Agreement?
In California, nondisclosure agreements must meet certain legal requirements. The nondisclosure clause must be in writing, clearly define what is considered confidential information, and establish the duration and scope of the confidentiality agreement. Additionally, the nondisclosure agreement must be signed by all relevant parties.
Vaguely written non-disclosure agreements are unlikely to hold up in court.
What Are the Key Elements of Every NDA?
The key elements of practically every valid nondisclosure agreement are the following:
- Definition of what is deemed ‘confidential.’
- Clear identification of the parties in the contract.
- The scope of the confidentiality agreement by the receiving party.
- Exclusions from confidential treatment.
- The terms of the agreement.
- And consequences if the agreement is reached.
What is Enforceable in a Non-Disclosure Agreement?
In California, a nondisclosure agreement may be enforceable, provided it meets basic criteria.
The restrictive covenant must be properly drafted. This entails clear writing, detailed information about the confidential components of the contract, and a clearly stated extent of the confidentiality obligation.
The terms must be considered reasonable. If the scope and duration of the NDA is deemed unreasonable, it may not hold up in court.
Valid NDAs protect legitimate business interests, such as trade secrets and proprietary information.
A non-disclosure agreement is a voluntary agreement. All parties must voluntarily agree to sign the agreement without coercion or duress.
What is Not Enforceable in a Non-Disclosure Agreement?
Not all NDAs are enforceable according to California law.
If the employment contract requires any party to commit an illegal act, the contract will be considered unenforceable.
Public policy considerations may override non-disclosure agreements that prevent the disclosure of vitally important information that is in the public interest or public safety.
An NDA that prevents an employee from working in their profession or field of trade may be considered a non-compete agreement. In California, non-compete agreements are more rarely enforceable.
NDAs can also not be used to prevent the reporting of illegal activity or to silence whistleblowers.
Can an Employee Be Forced to Sign a Confidentiality Agreement?
A nondisclosure agreement, like essentially any other type of contract, must be entered into voluntarily. Signatures that were signed under duress or coercion would potentially render the contract unenforceable. You cannot be forced to sign a confidentiality agreement. However, there may be employment-related consequences for failing to sign the agreement that you are asked to sign.
How Long Does an NDA Last?
How long a nondisclosure agreement lasts will vary from case to case. Some confidentiality agreements last a year, whereas others can last up to a decade. There is no set time frame for how long an NDA is allowed to last. Technically, provided it is drafted properly, an NDA could last indefinitely.
What Are the Penalties for Breaching Confidentiality Agreements?
If you breach a non-disclosure agreement, the non-breaching party (in this case, your employers) has the right to take legal action to seek or request an injunction or both. The legal action that your employer will take may depend upon the severity of the breach and the actual damage caused by the breach.
Do Employers Often Sue Employees Over NDA Violations?
Most employees entrusted with basic everyday workplace functions are unlikely to need to sign an NDA. However, in cases involving engineers and high-level employees, a nondisclosure agreement may be more necessary.
For an employer to file a lawsuit against an employee for violating their NDA, the damage caused by the breach must be considerable. Nondisclosure agreement lawsuits can be expensive and time-consuming. However, sometimes, an employer wants to make a statement and send a message, in which case they file a suit against the breaching party. In most cases, these disputes are settled out of court or sometimes even dismissed by the court.
Can NDAs Be Enforced in Cases of Sexual Harassment?
No.
In addition, California’s STAND Act and Silenced No More Act make it unlawful for businesses to use nondisclosure agreements to prevent their employees from revealing factual information regarding sexual assaults, workplace harassment, workplace discrimination, or workplace retaliation.
Is it Possible to Terminate an Existing Non-Disclosure Agreement?
If all parties are in agreement on the termination of the NDA, they may mutually agree to terminate the contract at any time. The agreement itself may also contain terms tied to a specific event or time period for termination.
Do You Have the Right to Retain Legal Representation?
Absolutely. In fact, we recommend it. Before entering any substantial contract with a business, it is wise to have experienced employment law attorneys review the contract. Our law firm would be proud to lend our legal assistance to you and represent your interests.
Contact Our Law Firm to Schedule Your Initial Consultation Today
If you have any questions or concerns about nondisclosure agreements in California, please don’t hesitate to contact our law offices to schedule a case evaluation. In your initial consultation, we will discuss your legal options and help you determine the right path to take.
To learn more about our legal services, please don’t hesitate to call us at 510-254-3777
