Keeping certain matters confidential – such as trade secrets and business plans – is critical to navigate the business world. It allows companies to differentiate their products and services and compete successfully.
Confidentiality is important, as most employers know. Even so, they must approach this matter with great care.
Recent case shows dangers of generalized agreements
Employers often use non-disclosure agreements to protect their intellectual property and company overall. However, a recent case illustrates that overly broad terms in an agreement can create significant legal issues for employers.
Although Baker & Associates was not involved in the recent case of Brown v. TGS Management Co., LLC, employers should take note of the details of this case. Essentially, the employer defined confidential information so broadly that:
- The former employee claimed the terms prevented them from working in the same field again
- The too-broad terms ultimately led the agreement to have the same effect as a non-compete agreement
Non-compete agreements are both unlawful and unenforceable under California Code.
Employers often try to include broader terms to ensure greater protection for their trade secrets and other critical information, but language that is too general can work against the business in the long run.
Reexamine the agreements
Non-disclosure agreements are allowed under state law. However, employers must take great care when creating them.
A proper non-disclosure agreement must be specific in its terms. This means employers must be precise in explaining:
- Which parties are involved and their obligations
- How long it is enforceable
- What information is confidential
Employers must be explicitly clear about what employees cannot discuss. They should review the terms of their non-disclosure agreements or confidentiality clauses to ensure they are specific – and not leaning too close to a non-compete.
Additionally, it is important to note that the more specific employers are in these agreements, the more likely it is that the courts will enforce it if the company faces legal issues in this area.