Companies routinely use non-disclosure agreements (NDAs) to protect their confidential and proprietary information. Along with requiring contractors and vendors to sign NDAs, companies frequently require their employees to sign NDAs as well. If you have been asked to sign an NDA (or if you have already signed an NDA), what do you need to know?
Here are some key considerations for employees in New York:
Non-Disclosure Agreements Are Generally Enforceable in New York
Under New York law, non-disclosure agreements are generally enforceable. When used appropriately, NDAs help protect legitimate business interests, and they are important tools for mitigating companies’ risk of loss. As a result, if you sign an NDA with your employer, there is a good chance that you will need to comply with its terms.
But while NDAs are generally enforceable in New York, there are exceptions. For example, if the terms of an NDA are unconscionable, then the NDA may be unenforceable as a matter of law. Likewise, if an NDA’s terms are so ambiguous that it is not clear what is prohibited and what isn’t, this can potentially render the NDA unenforceable as well.
Of course, even if your NDA is unenforceable, this won’t necessarily prevent your employer from trying to enforce it. Additionally, there are no guarantees that a court or arbitration panel will rule in your favor. As a result, if you have signed an NDA and you believe that it is unenforceable, it will be important for you to consult with a lawyer so that you can make an informed decision about how best to proceed.
Employers Can Generally Require At-Will Employees to Sign an NDA as a Condition of Employment
New York is an at-will employment state. This means that, “[w]ithout a contract restricting termination, generally an employer has the right to discharge an employee at any time for any, or no, reason, providing [the employee’s discharge] is not an act of illegal retaliation or discrimination.”
Since New York is an at-will employment state, employers can generally require their employees to sign an NDA as a condition of employment. If your employer asks you to sign an NDA and you refuse, your employer may decide that continuing your employment is not worth the risk. In this scenario, your employer would generally be within its rights to terminate your employment, provided that relying on your refusal to sign an NDA was not a pretext for a retaliatory or discriminatory termination.
With that said, if your employer asks you to sign an NDA, you should not simply do so without reading its terms. It is important to know what you are signing, and if you have questions, you should seek legal advice. For many employees—including those in technical and specialized occupations—signing a broadly worded NDA could potentially have undue negative effects on their future employment or business prospects.
Employees Who Violate Their NDAs Can Face Discipline and Other Consequences
Another important reason to carefully read your non-disclosure agreement is that violating its terms could lead to disciplinary action or other consequences. Many employers vigorously enforce their employees (and former employees) non-disclosure obligations. While an employer’s actions in response to an NDA violation should generally be proportional to the consequences of the violation, the nature of at-will employment means that employers have broad discretion to determine how they want to handle breach scenarios. Employers will often include enforcement and remedy provisions in their NDAs as well.
New York’s “Anti-Gag Clause” Law Prohibits Certain Confidentiality Obligations (Subject to Exceptions)
Another exception to the enforceability of non-disclosure agreements in New York is that employers cannot use employee NDAs to conceal information about discrimination, harassment, or retaliation—although this exception is subject to exceptions of its own. Although this most often comes into play in the context of settlement negotiations between employers and employees, broadly worded general NDAs may cover these topics as well.
While NDA clauses that require employees to conceal information about discrimination, harassment, or retaliation are generally unenforceable, employers can make them enforceable by including appropriate carveouts (i.e., for communications with the New York State Division of Human Rights (DHR), the U.S. Equal Employment Opportunity Commission (EEOC), and law enforcement agencies). Additionally, if an employee wishes to keep information about a claim confidential, the employee can opt to do so.
NDAs and Non-Competes Are Not the Same
While NDAs and non-competition agreements (or “non-competes”) often go together, they are not the same. An NDA prohibits the disclosure of confidential information, while a non-compete prohibits an employee (or former employee) from starting or working for a business that targets the same customer base.
As a result, if you only sign an NDA, then you are not subject to competitive restrictions—provided that you do not impermissibly use your employer’s (or former employer’s) confidential information for competitive purposes. However, if you sign an NDA and a non-compete, then you will need to comply with the enforceable prohibitions in both contracts. Additionally, even if you haven’t signed a non-compete, your employer may still determine that your work for a competing business is justification for terminating your at-will employment.
If You Have Questions About Signing an NDA (or Non-Compete), You Should Talk to an Employment Lawyer
Given the potential pitfalls that NDAs (and non-competes) can present for current and former employees, if you have questions about signing one of these agreements, you should talk to an employment lawyer before you sign. An experienced employment lawyer will be able to help you understand the risks involved and make informed decisions with your long-term best interests in mind.
Schedule a Consultation with a New York Employment Lawyer at Bell Law Group
Do you have questions about signing an NDA or non-compete agreement with your employer? Or, do you have questions about your obligations under an existing NDA or non-compete? If so, we invite you to get in touch. To speak with an experienced New York employment lawyer at Bell Law Group in confidence, call 516-280-3008 or request a consultation online today.
