Non-Disclosure Agreement – Employee

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Massachusetts employers frequently require employees to execute a non-disclosure agreement to protect trade secrets, so they can prevent providing other organizations with access to confidential information that may give them a competitive advantage. However, these contracts can be a burden on your ability to earn a living if they unreasonably preclude you from seeking new job opportunities.

While you should consult with one of our experienced employment attorneys at Rodman Employment Law about the specifics of your situation, some background information may also help you understand how non-disclosure agreements work.

Summary of Non-Disclosure Agreements

In employment law, a non-disclosure contract is an agreement between an employer and employee where the employee agrees to not reveal certain information learned within the context of the employment relationship. Employers often ask employees to sign this type of restrictive covenant upon starting work because they are seeking to protect proprietary trade secrets or confidential information.

Though you may be requested to sign a non-disclosure agreement when you begin a new position, you must keep in mind that the terms of such agreements usually continue to apply after you leave, either voluntarily or involuntarily. Massachusetts courts look negatively upon these covenants where they place an undue burden on an employee’s ability to obtain employment. Judges will only enforce a non-disclosure agreement that complies with state law on trade secrets.

  • Massachusetts Law on Non-Disclosure Agreements: Massachusetts has developed legal principles to protect trade secrets through legislation and case law. In the Massachusetts statute on taking trade secrets, there is a prohibition on taking qualifying information through such acts as embezzlement, stealing, fraud, copying, and other misconduct. If you violate the provisions of a legally valid non-disclosure clause, your employer may sue to enjoin your activities and prevent you from continuing to engage in wrongdoing. In addition, an employer can seek monetary damages for the losses it suffers as a result of your breach. Note that Massachusetts law does allow a court, in the discretion of the judge, to double the amount of damages.
  • Non-Disclosure Agreements Under Federal Law: The federal Economic Espionage Act does impact confidentiality agreements by making it a crime to misappropriate trade secrets. Some information that companies maintain could be considered a trade secret, such as customer lists and contact information. There is also a private right of action for a company to sue an employee who steals items that qualify as trade secrets under the Act.

Provisions Included in Non-Disclosure Agreements

 A non-disclosure agreement will usually contain provisions where your employer mentions the value of trade secrets, identifies protected information, and forbids you from divulging it. Acts that are commonly prohibited by non-disclosure agreements are:

  • Presenting an invention to a business partner, investor, or distributor;
  • Showing a product or demonstrating technology to a potential customer; and,
  • Revealing financial, marketing, or other details to others outside your business.

 

Enforcement Actions by Employers

 The penalties for violating a valid non-disclosure agreement can be severe, but a Massachusetts employer bears a heavy burden in proving its case.

  • Your employer must first show the existence of a valid contract, including the identification of the parties, acknowledgement of consideration, description of the trade secrets or confidential information, the obligations of the parties, and other essential terms.
  • The employer must also prove the elements of a typical breach of contract action, which focus on the ways that you allegedly violated the contract.
  • Your employer must also show that the confidentiality clause is enforceable, because an agreement that does not comply with Massachusetts trade secrets laws will not be upheld by a court. Judges apply a six-factor test developed under general principles of common law, which are:
    • Whether the information your employer seeks to protect is known outside the company;
    • Whether the information is known to employees, partners, and others involved in business relationships with your employer;
    • The lengths your employer goes to in protecting the information, such as requiring passwords for software, encryption, and other measures;
    • The value of the information to your employer’s direct competitors;
    • How much your employer may have invested in effort, money, or other resources, to develop the information; and,
    • How easy it would be for others to acquire or duplicate the information through legal methods.

 

Court Opinions on Non-Disclosure Agreements 

While cases on breach of non-disclosure agreements depend on a number of factors, the findings of Massachusetts courts serve as legal precedent.

 Judges meticulously scrutinize the contractual language in favor of the employee, because of the weaker bargaining position he or she is in compared to the employer.

  • Trade secrets are defined as information that is confidential, is used in connection with business operations, and gives a company a competitive advantage over other organizations that do not have access to it.
  • The definition of trade secret does not include a requirement that the information be patentable by the owner.

 

Legal Recourse for Unjust Non-Disclosure Agreements

 If you did sign a non-disclosure agreement with your employer, you do have options to avoid the harsh consequences that occur when you try to seek new employment. As mentioned, the burden of a Massachusetts employer in proving the case is high. If you are threatened with legal action, you can work with an experienced attorney to demonstrate that:

  • The essential elements of a contract do not exist, especially as they relate to consideration when you signed the confidentiality agreement after you already started work;
  • Your actions do not amount to breach of contract, so your employer has no legal standing; or,
  • The non-disclosure agreement is not enforceable because it does not comply with Massachusetts law.

With any of these types of legal recourse, time is of the essence in retaining a knowledgeable lawyer to represent your interests. Resolving any disputes as quickly as possible enables you to move forward right away to new employment, without burdens or concerns about future legal action.

Non-Disclosure Agreements (NDA) – Resources & Statistics

 Links

Nondisclosure Agreement – Definition of a non-disclosure agreement from the Nolo Plain-English Law Dictionary as provided by the Cornell Law School.

The Key Elements of Non-Disclosure Agreements – Provides information on when Non-Disclosure Agreements (NDAs) make sense to require, different types of NDAs (mutual vs. non-mutual), key elements of NDAs, what qualifies as confidential, the scope of the obligation, exclusions from NDAs, and the length of NDAs.

Trade Secret – Information provided by Cornell Law School about the Uniform Trade Secrets Act (UTSA) which is legislation created by the Uniform Law Commission, a non-profit organization, that protects information, such as trade secrets, like that of an NDA.

Trade Secrets Act Summary – Information about the UTSA provided by the Uniform Law Commission.

The Defend Trade Secrets Act of 2016 and Its Coexistence with Massachusetts Law – Article from the Boston Bar Journal which details the federal law which protects proprietary information and how it relates to Massachusetts state law.

Massachusetts General Law Part I Title XV Chapter 93 Section 42 – Massachusetts’ law about the taking of trade secrets.

Massachusetts General Law Part I Title XV Chapter 93 Section 42A – Massachusetts law about the ability to restrict the actions of people who have taken trade secrets.

Defend Trade Secrets Act of 2016 – The text of the law which creates federal jurisdiction over the theft of trade secrets.

Statistics

  • 47 states and the District of Columbia have adopted the UTSA detailed in an above link.[1]
  • The maximum fine for stealing trade secrets for monetary benefits under U.S. Code Title 18 Part I Chapter 90 Section 1832 is $5,000,000 or three times the value of the trade secret.[2]

[1] https://www.law.cornell.edu/wex/trade_secret

[2] https://www.law.cornell.edu/uscode/text/18/1832

Consult with an Employment Lawyer About Non-Disclosure Agreements in Massachusetts

If your employer has presented you with a non-disclosure agreement, or you already signed one and want to know your rights, it is critical to retain an experienced employment lawyer to advise you. For more information or to schedule a consultation, please contact or call 617.820.5250 to reach the Boston-based law firm of Rodman Employment Law.

Rodman Employment Law

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