Employee NDA FAQ

An employee NDA (Non-Disclosure Agreement) is a legally binding contract between an employer and employee that restricts the employee from disclosing confidential company information. It protects trade secrets, business strategies, customer lists, financial data, and other proprietary information.

Employee NDAs typically define what information is considered confidential, outline the employee's obligations to protect that information, specify how long the obligations last, and explain the consequences of breach.

The terms are often used interchangeably, and legally they function the same way. However, there are subtle connotations:

• NDA (Non-Disclosure Agreement): Often used in business-to-business contexts, such as during negotiations, partnerships, or due diligence
• Confidentiality Agreement: More commonly used in employment contexts with provisions specific to the employer-employee relationship

In practice, the specific terms of the agreement matter far more than what it's called. Always read the full document regardless of its title.

Employee NDAs typically protect several categories of information:

• Trade secrets: Formulas, patterns, devices, processes, or compilations of information that derive value from being secret
• Business information: Financial records, pricing strategies, marketing plans, business forecasts
• Customer data: Customer lists, contact information, purchasing history, contract terms
• Technical information: Software code, algorithms, product designs, engineering specifications
• Personnel information: Salary structures, employee performance data, HR policies
• Strategic plans: M&A targets, expansion plans, partnership discussions

These are fundamentally different types of restrictions:

• NDA: Prevents you from sharing information. You can work anywhere, but you can't disclose confidential information.
• Non-compete: Prevents you from working for competitors for a specified period, regardless of what information you know.

NDAs are enforceable in all states when protecting legitimate confidential information. Non-competes are banned in California, Minnesota, North Dakota, and Oklahoma, and are restricted in many other states.

The ideal time to sign an employee NDA is during the hiring process, before you start work and gain access to any confidential information. This is when:

• The offer of employment serves as valid consideration for your promise
• You haven't yet been exposed to confidential information
• Both parties are clear on expectations from the start

If asked to sign an NDA after you've already started working, the legal requirement for "consideration" (something of value exchanged) becomes more complicated. Some states require additional consideration beyond continued employment.

For new employees in at-will employment states, yes - an employer can make signing an NDA a condition of employment. If you refuse, they can withdraw the job offer.

For existing employees, it's more nuanced:

• Some states (like Texas): Continued employment alone can be sufficient consideration
• Other states: Require additional consideration like a raise, bonus, promotion, or access to new confidential information

You cannot be fired in retaliation for refusing to sign an NDA that contains illegal provisions, such as waiving whistleblower rights.

Yes, many NDA terms are negotiable, especially for senior positions or in-demand roles. Common points of negotiation include:

• Definition of confidential information: Narrowing overly broad definitions
• Duration: Reducing post-employment obligations from 5 years to 2 years
• Carve-outs: Protecting your prior knowledge, side projects, or general skills
• Geographic scope: Limiting where restrictions apply
• Return of materials: Keeping copies of your own work product

Even if the company says "this is standard" or "non-negotiable," it doesn't hurt to ask. The worst they can say is no.

Take as much time as you need to understand the agreement. A reasonable employer will give you at least a few days. Red flags include:

• Pressure to sign immediately or "on the spot"
• Refusal to provide a copy to take home
• Discouraging you from consulting a lawyer

For complex agreements or senior positions, consider having an employment attorney review it. The cost of a legal review (typically $200-500) is minimal compared to the potential impact of signing an overly restrictive agreement.

An NDA typically only covers information disclosed after the agreement is signed, unless it specifically includes retroactive provisions. If you're asked to sign an NDA that covers prior disclosures:

• Request a carve-out for information already shared
• Document what information was shared before signing
• Negotiate for protection against claims for prior disclosures

If you previously disclosed truly confidential information before signing, consult an attorney about your potential liability under trade secret laws (which don't require an NDA).

The consequences of breaching an NDA can be severe:

• Immediate termination: You can be fired for cause
• Civil lawsuit: The employer can sue for breach of contract
• Monetary damages: You may owe actual damages, lost profits, and potentially punitive damages
• Injunctive relief: A court can order you to stop disclosing information
• Attorney's fees: You may have to pay the employer's legal costs
• Criminal charges: In cases involving trade secret theft, federal criminal charges under the Economic Espionage Act are possible

Yes, when properly drafted, employee NDAs are enforceable in all 50 states. However, courts may refuse to enforce NDAs that are:

• Overly broad: Covering information that isn't truly confidential
• Unreasonable in duration: Lasting far longer than the information's competitive value
• Lacking consideration: When existing employees receive nothing in exchange
• Against public policy: Restricting whistleblowing or other protected activities
• Effectively a non-compete: In states like California that ban non-competes

Courts generally favor narrowly tailored NDAs that protect legitimate business interests without unduly restricting employee mobility.

The duration varies based on the type of information:

• Trade secrets: Indefinitely, as long as the information remains a trade secret
• General confidential information: Typically 2-5 years after employment ends
• Customer lists and relationships: Usually 1-3 years
• Technical know-how: Often 3-5 years, depending on how quickly technology evolves

Some NDAs have a single duration for all information, while others specify different periods for different categories. The more specific the agreement, generally the more enforceable.

Potentially yes. NDAs protect confidential information regardless of form - whether written, electronic, or stored in your memory. However, courts distinguish between:

• Specific confidential information: Exact formulas, customer lists, specific plans - these are protectable
• General skills and knowledge: Your general expertise, industry knowledge, and professional skills - these are NOT protectable

You can use your general knowledge and skills in a new job. You cannot use specific confidential information, even if you only remember it rather than having a copy.

Different states handle unreasonable NDA provisions differently:

• "Blue pencil" states: Courts will modify or strike unreasonable provisions while enforcing the rest
• All-or-nothing states: An unreasonable provision may void the entire agreement
• Reformation states: Courts will rewrite provisions to be reasonable

Even in blue pencil states, don't assume courts will fix unreasonable terms in your favor. It's better to negotiate reasonable terms upfront or have an attorney review before signing.

No. Under the Defend Trade Secrets Act (DTSA), you have immunity for disclosing trade secrets to government officials or attorneys when reporting suspected violations of law. This protection cannot be waived by contract.

Additionally, various federal and state whistleblower laws protect employees who report:

• Securities fraud (SEC whistleblower program)
• Tax fraud (IRS whistleblower program)
• Healthcare fraud (False Claims Act)
• Workplace safety violations (OSHA)
• Environmental violations (EPA)

No. Under the National Labor Relations Act (NLRA), employees have the right to discuss wages and working conditions with coworkers. This right applies to most private-sector employees, even those not in unions.

NDAs that prohibit salary discussions may be unenforceable to that extent, and employers who retaliate against employees for discussing pay may face NLRB charges.

Note: This protection primarily covers discussions with coworkers. Publicly disclosing company-wide compensation data may still be restricted.

Generally no. Most NDAs don't prevent you from:

• Confirming your employment dates and position
• Describing your general job duties
• Providing professional references
• Discussing your work experience in job interviews

However, you should not disclose specific confidential information during references or interviews, such as proprietary processes, customer names, or unreleased product details.

Increasingly, yes. Many states have passed laws limiting the use of NDAs to silence harassment and discrimination claims:

• California: Cannot use NDAs to prevent disclosure of sexual harassment or discrimination
• New York: Similar restrictions on harassment-related NDAs
• New Jersey: NDAs cannot prohibit disclosure of discrimination details
• Federal: The 2022 Speak Out Act limits enforcement of pre-dispute NDAs for sexual harassment claims

Even in states without specific laws, NDAs cannot prevent you from filing complaints with the EEOC or state civil rights agencies.

Prior inventions should be protected through a disclosure schedule. Best practices:

• Document everything: Before signing, list all prior inventions, ideas, and projects
• Attach to the agreement: Most NDAs/PIIAs have an exhibit for prior inventions
• Be thorough: Include anything you might want to develop further, even if incomplete
• Keep proof: Retain evidence of creation dates (commits, emails, notes)

California Labor Code Section 2870 provides additional protection - employers cannot claim inventions created entirely on your own time without company resources.

Not necessarily. Consider which employees actually have access to confidential information:

• Always recommend: Executives, R&D staff, sales teams (customer access), IT (system access), finance
• Case-by-case: Administrative staff, customer service, entry-level positions
• Probably unnecessary: Employees with no access to confidential systems or information

Using NDAs too broadly can create enforcement difficulties and employee relations issues. Reserve comprehensive NDAs for those who genuinely need access to sensitive information.

Courts are more likely to enforce NDAs that:

• Define confidential information specifically rather than using catch-all language
• Include reasonable time limits appropriate to the information's value
• Provide for adequate consideration especially for existing employees
• Include the required DTSA notice regarding whistleblower immunity
• Exclude publicly available information and general knowledge
• Match your actual practices - if you don't treat information as confidential, courts won't either

A proper exit process reinforces NDA obligations:

1. Exit interview: Remind departing employees of their ongoing obligations
2. Return of materials: Collect all company devices, documents, and access credentials
3. Written acknowledgment: Have them sign confirming return of materials and understanding of obligations
4. System access: Immediately revoke access to all company systems
5. New employer notice: Consider informing the new employer of the NDA's existence (carefully, to avoid tortious interference claims)

Document this process - it demonstrates you take confidentiality seriously and strengthens enforcement if needed later.

Yes, but you need valid consideration. Options include:

• Promotion or new role: Access to new confidential information
• Raise or bonus: Additional compensation
• Stock options: Equity grants
• Continued employment: Sufficient in some states, but not all

Simply requiring employees to sign without any new consideration may make the agreement unenforceable in many jurisdictions.

All states allow NDAs protecting legitimate confidential information. However, some states have specific restrictions:

• California: NDAs that function as de facto non-competes may be void; strong employee protections under Labor Code 2870
• Washington: Must specify what confidential information the employee will access
• Illinois: Special rules for NDAs with low-wage workers
• New York: Additional consideration required for mid-employment NDAs

Multiple states (CA, NY, NJ, others) restrict NDAs that would silence harassment or discrimination claims.

Most NDAs include a "choice of law" provision specifying which state's law applies. However:

• Employee protections: Some state laws (like California's non-compete ban) apply to residents regardless of choice of law provisions
• Where you work: Courts may apply the law of the state where you primarily work
• Public policy: Courts won't enforce choice of law that violates local public policy

If you're a California resident working for a Delaware corporation with a Texas choice of law clause, California law may still protect you on certain issues.

This is increasingly complex as remote work grows. Factors courts consider:

• Where the employee physically works
• The choice of law provision in the agreement
• Where the employer is headquartered
• Which state has the strongest interest in the dispute

Generally, courts give significant weight to where the employee actually works. A California resident working from home for a New York company may be protected by California's employee-friendly laws.