Understanding Non-Disclosure Agreements: What You Need to Know
Written by Emily Kerby - February 21, 2025
At Jafari Law Group, we understand how important it is for businesses to protect their proprietary information, while also ensuring that employees and contractors know their rights. Non-Disclosure Agreements (NDAs) are one of the most common tools used to safeguard sensitive information, but they come with legal complexities that both employers and employees need to understand. This article explores what NDAs are, when they’re used, and how they are governed under California law.
What is a Non-Disclosure Agreement (NDA)?
A Non-Disclosure Agreement (NDA) is a legally binding contract that ensures one party (typically an employee or contractor) does not disclose confidential information that they learn during their work or business relationship with another party (usually the employer or business owner). NDAs are often used in employment situations to protect trade secrets, business strategies, customer lists, financial data, and other proprietary information that could harm a company if shared with competitors or the public.
Why Do Businesses Use NDAs?
Businesses use NDAs for several reasons:
- Protection of Trade Secrets: Companies often rely on proprietary information to maintain a competitive edge. NDAs help protect sensitive data such as product designs, marketing plans, and financial information.
- Preventing Disclosures: NDAs ensure that employees, contractors, and partners don’t share confidential information with third parties that could damage the business or violate intellectual property rights.
- Building Trust in Business Relationships: By establishing clear legal boundaries on confidentiality, NDAs allow businesses to share critical information with potential partners, contractors, or investors without fear of unauthorized disclosure.
Key Elements of an NDA
An NDA generally includes:
- Definition of Confidential Information: The agreement specifies exactly what constitutes confidential information (e.g., trade secrets, business strategies, client data).
- Duration of Confidentiality: NDAs typically outline how long the information must remain confidential, both during and after the business relationship.
- Obligations of the Receiving Party: The party receiving the confidential information is usually prohibited from sharing or disclosing it to others, except under certain conditions.
- Consequences for Breach: NDAs specify the legal and financial consequences if the confidentiality terms are violated.
Non-Disclosure Agreements Under California Law
California is known for its worker-friendly legal protections, and NDAs are no exception. While these agreements are generally enforceable, there are key limitations that protect employees and other parties:
- No Restricting Legal Rights: California law prohibits NDAs from restricting an individual’s ability to report illegal activities. For example, an NDA cannot stop an employee from reporting discrimination, harassment, safety violations, or other unlawful conduct.
- Non-Compete Provisions Are Void: While NDAs often include non-compete clauses to prevent employees from working with competitors, California law prohibits non-compete agreements in most circumstances. These clauses are generally unenforceable, so even if an NDA includes one, it may not be legally binding.
- Limitations on NDAs in Harassment and Discrimination Cases: California’s AB 749 (2023) law prohibits employers from including NDAs in settlements or severance agreements that involve harassment, discrimination, or retaliation claims. This means employees are free to speak out about such issues, even if they’ve signed an NDA as part of their separation from the company.
- Reasonable Scope: For an NDA to be enforceable, it must be reasonable in its scope and duration. Overly broad or vague NDAs that restrict an employee’s future employment opportunities may not stand up in court.
How Does an NDA Affect Employees and Contractors?
While NDAs are primarily created to protect employers, they can also have significant impacts on employees and contractors:
- Protection of Career and Reputation: Employees may be required to maintain confidentiality after they leave a company, which could impact their ability to share certain aspects of their career or work experience. It’s crucial for employees to fully understand the terms before signing.
- Risk of Legal Consequences: Breaching an NDA can lead to serious legal consequences, including the possibility of civil damages, financial penalties, or even criminal charges in cases involving the theft of trade secrets.
Enforcing and Challenging an NDA
If you’ve signed an NDA and are facing a breach or believe it was unfairly imposed, it’s important to understand your rights. Employers may seek enforcement through legal action, including lawsuits for damages or to stop the disclosure of confidential information. However, California law provides protection against overreaching or unfair NDA provisions, particularly those that violate public policy or infringe on workers’ rights.
How Jafari Law Group Can Help
At Jafari Law Group, we offer expert legal counsel on all aspects of employment law and intellectual property protection, including Non-Disclosure Agreements. Whether you are an employer looking to protect your company’s trade secrets or an employee who needs assistance understanding or challenging an NDA, our experienced attorneys are here to help.
If you are navigating an NDA in your workplace or business and need legal advice, don’t hesitate to contact us. Our team can help ensure your NDA is compliant with California’s strict laws, protect your interests, and help you avoid potential legal pitfalls.
Contact Us
At Jafari Law Group, we’re dedicated to providing high-quality legal services to protect your business and career. If you have questions or concerns about signing or enforcing an NDA, or if you need assistance with any employment or intellectual property issue, reach out today for a consultation. Let our team guide you through the legal complexities and help you make informed decisions.