Whether you are CEO of a public company or owner of a private company, it’s never fun when a valued employee submits a letter of resignation. You know this employee signed a confidentiality or nondisclosure agreement (NDA), so you feel some sense of relief. The NDA restricts disclosure of confidential information both during employment and for a specifically stated time after the employment relationship ends. Additionally, the NDA contains a “covenant not to compete” provision, commonly referred to as a “noncompete,” which prevents the employee from working with any company which is in the same or similar business as your company. Because the departing employee signed an NDA with a noncompete, you tell yourself that everything is going to be fine—isn’t it?
To the dismay of many an employer, especially those not well-versed in employment law, the law regarding NDAs is not so clear cut. An additional perturbation exists if you have employees in several states, as the laws within each state are different and extremely fact-specific. As such, an NDA is not a surety against revolving employees. See, e.g., Strata Marketing v. Murphy, 317 Ill. App.3d 1054, 1066 (2000). At their root, prohibitions against using methods and manners learned during employment following termination of that employment will not be enforced except in unusual situations. NDAs should be as specific as possible as to what is confidential and contain various exclusion clauses that outline the types of information deemed not to be confidential within the terms of the agreement. And, lastly, NDAs should have a reasonable time constraint. As the advocate of your firm’s intellectual property, your attorney must persuade the court that the confidential information at issue contains methods and manners that are truly unique and zealously guarded.
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