3 Reasons for Nondisclosure Agreements at Your Business

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3 Reasons for Nondisclosure Agreements at Your Business

There are good reasons to implement nondisclosure agreements at your business. If you have not considered having employees sign a nondisclosure agreement, you may not realize the protective benefits you are missing. If you already have a nondisclosure agreement in place, now might be a good time to review it. Appropriately drafted nondisclosure agreements can help you (1) protect trade secrets, (2) safeguard in-house materials and knowledge, and (3) prevent employee poaching. You want your business to succeed, so make sure you have the right agreements in place to protect you and your business partners.

  1. Protect Trade Secrets

Trade secrets are an important part of many businesses and industries. A trade secret is a process, procedure, or recipe that is not public knowledge outside your business or industry. Many businesses have their own “secret recipes” for their products. These trade secrets attract loyal customers to the business, separate the business from competitors, and provide longevity for a product. If a trade secret unknown to people outside your company became public, it could severely affect your bottom line. Fortunately, nondisclosure agreements can help you keep your trade secrets safe from competitors.

The agreement you require all employees to sign should include robust language prohibiting them from disclosing trade secrets to competitors or the public. Your business lawyer can help you develop an appropriate definition of trade secrets in the agreement. A trade secret in your industry may differ from a trade secret in another industry. Or you may have a specific trade secret that you need to protect (a particular recipe or process). You need a customized nondisclosure agreement to provide the best protection against leaked trade secrets.

  1. Safeguard In-House Materials and Knowledge

Like trade secrets, in-house materials and knowledge are often an invaluable part of a business’s success. You may have developed manuals, guides, or procedures that help your business run smoothly. A nondisclosure agreement can help you keep that information in-house. When employees leave a company, sometimes they take manuals or business files with them. Your agreement should specify that employees must return all of your business’s important materials and knowledge to you when they leave. It also should state that these materials are the property of your business, not of individual employees.

Along with an appropriate nondisclosure agreement, make sure you take precautions to safeguard physical and digital information. You may need IT help to prevent data leaks or a physical document retention policy.

  1. Prevent Employee Poaching

Third, nondisclosure agreements can help prevent employee poaching. In other words, having all employees sign these agreements could keep competitors from hiring away your employees for their trade secret knowledge. It also could keep your employees from leaving to start their own businesses in competition with you.

Nondisclosure agreements work for this purpose because they are legally binding documents that can be enforced in court. If an employee leaves your business for a competitor and then the competitor starts using your secret recipe, you could sue. You may have recourse in court to recover damages from the employee for violating the nondisclosure agreement or bar the competitor from using your trade secret. Consult with a business lawyer if you believe that your agreement has been violated or if you think a competitor has taken your trade secrets.

In addition, you may need to sign noncompetition agreements with employees who could be poached. Noncompetition agreements are not enforceable in all locations or industries because they would restrict employees’ ability to get jobs too much. Your lawyer can advise you on whether a noncompetition agreement could be appropriate to prevent employee poaching.

In sum, nondisclosure agreements can be very useful tools to protect your business’s trade secrets. They also may protect in-house materials and knowledge. Finally, they could prevent employee poaching.

Let Us Help with Your Nondisclosure Agreements

Need a business agreement drafted or reviewed? As experienced Houston business lawyers, we help our clients find the best solution possible. We work with business owners and managers on complicated issues such as business divorces, preparing appropriate agreements, and more. Our advice is not “one-size-fits-all,” but is tailored to your unique situation. Schedule a consultation with Henke & Williams by calling 713-940-4500 or using our convenient Contact Form.

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