During the first 2020 primary debate, Michael Bloomberg was slammed for his company’s use of non-disclosure agreements (NDAs) to cover up the company’s unfair treatment of three women executives. The assertion put Bloomberg’s promising candidacy on the defensive, and it prompted his company to release the three women in question from their NDAs the following day.
NDAs have been one rallying cry for the #MeToo movement, but these agreements are important in many business relationships. These agreements allow companies to protect company secrets, proprietary information and intellectual property shared with employees, contractors, business partners, or others. NDAs are a legal handshake that helps provide guidelines for business partnerships, employee contracts and other agreements. They also outline potential legal consequences for those who violate the agreement.
How are they used?
The needs and goals of each business are different, but here are some instances when these contacts can be useful:
- Sharing information regarding new products and services
- Information about clients and sales contracts
- Details regarding manufacturing procedures
- Non-public accounting information
- Secret formulas, unique recipes and special sauces
What they cannot do
NDAs cannot cover all elements of a business relationship. Notably, they are not binding if used for illegal activities, such as covering up sexual harassment, discrimination and other unlawful workplace behaviors. They cannot be enforced if the information becomes public when filed with U.S. Securities and Exchange Commission or included in other public filings. It does not apply to evidence supplied for a court subpoena. Companies also cannot enforce them over knowledge attained before or after the scope of the contract.
What is an enforceable agreement?
Like many other contracts, NDAs have the best chance for successful enforcement when they are not overly restrictive or unduly harsh.
Since the circumstances and needs of each business are unique, it is best to discuss your needs and goals with an attorney who drafts these agreements for clients. These legal professionals can also provide legal guidance if there appears to be a violation of the agreement.