In 2019, California restricted, and in some cases banned, the use of non-disclosure agreements (often referred to as NDAs) for issues of sexual assault or harassment amid the rise of the #MeToo movement. Since then, the overall validity and enforceability of NDAs in the Golden State has raised both eyebrows and legal questions.
Non-disclosure agreements are confidentiality agreements that prohibit the signatory from revealing trade secrets, customer data, and other sensitive information arising from a relationship with another party. Many employees and contractors are required to sign NDAs when beginning a relationship with a new company.
If you’re an employee or employer in the San Francisco area and are confused about the validity and use of nondisclosure agreements in California, contact Wood Litigation, APC. Our business litigation attorneys can provide the guidance you need when drafting NDAs to meet any new legal hurdles, and can also help employees exercise their rights if an NDA is being wrongly used against them.
What Is a Non-Disclosure Agreement?
As mentioned above, a non-disclosure agreement is a legal contract that establishes a binding confidentiality requirement on the party or parties who sign it. This means the signatories are prohibited from revealing or sharing sensitive information that they obtain during their business relationship with any other parties. Examples of sensitive information can include trade secrets, patents, customer and vendor data, algorithms, proprietary software, business strategies and methods, business formulas and processes, designs and specifications, and physical technologies and devices.
Businesses entering into negotiations with other businesses about joint ventures or contractual agreements will often employ NDAs before discussions begin to protect any trade secrets, patentable work, or other sensitive information. Contractors being hired for a specific job or purpose may also be restricted through an NDA.
New employees — and even job interviewees — are also often required to sign NDAs to keep sensitive company information from getting into the hands of potential competitors. For instance, an engineer working on proprietary technology or new projects might be forbidden to reveal what he learns. A salesperson may be barred from taking any customer data to another firm or using it to start a new business venture.
What Is Enforceable in California?
For an NDA to be enforceable in California, it must not be too generic or too open-ended (no time limit established), or the courts will likely throw it out. Oftentimes, if a firm downloads a generic NDA from the Internet that covers everything including the kitchen sink, and is open-ended, it will fail to meet California requirements. An enforceable NDA in California must include:
- A statement of the purpose of the NDA and the parties involved
- The specifics about what information cannot be disclosed
- Clarification of what is considered confidential and what is not
- A notice concerning the proper ownership of any confidential information
- A description of how the signatory must protect the confidential information (examples include: never reveal it, return it to the owner, destroy records of it)
- A time period during which the NDA will be in effect
- A notice of what actions might or will be taken if the NDA is violated
NDAs, however, cannot be used to protect information that:
- Is already in the public domain
- The signatory already had access to prior to signing the NDA
- Has been ordered to be revealed by government regulation or a court
- Can be reverse-engineered after the product is revealed to the public
An example of government action changing what information can and cannot be protected by an NDA came in 2019 with Section 1001 of the California Code of Civil Procedures. That section now bans non-disclosure agreements that prohibit "the disclosure of factual information related to a claim filed in a civil action or a complaint filed in an administrative action" if those claims include allegations of sexual assault, sexual harassment or workplace harassment or discrimination based on sex.
How Long Does an NDA Last?
How long an NDA can last greatly varies. Some can last a year while others can last up to ten years. There isn't a set timeframe on how long and NDA lasts, so technically one could last indefinitely.
Seek the Help of Experienced Business Litigation Attorneys
As you can see, an enforceable NDA hinges on a number of different factors that can be challenged by the parties who enter into it. If you try to be too general and fail to define exactly what you’re protecting, you could end up having your NDA tossed out by the courts. Similarly, if you signed an NDA that lacks the proper elements, you may be legally protected from any adverse action by the issuing party.
It is imperative that both parties on either end of an NDA know and exercise their legal rights. If you are in the process of drafting an NDA, or considering drafting or signing one, contact our office today to have an experienced business litigation attorney review the details of your case.
If you live in the San Francisco area, or nearby in San Jose, Oakland, Santa Clara, or any of the neighboring areas, contact Wood Litigation, APC today. Whether you're an employee or employer, our experienced attorneys can review the unique details of your situation, explain your rights and obligations, and provide the reliable legal counsel and guidance you need.