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8 Reasons Why Having a Non Disclosure Agreement Is Critical

A non-disclosure agreement, or NDA for short, is a legally binding contract that protects sensitive, confidential information. Businesses often require their employees to sign one before they can begin work.

An NDA protects the data cited within it, ensuring that certain information does not travel beyond the authorized employees. Therefore, regardless of your industry type, an NDA can protect your data and keep your operations in order.

Are you considering creating an NDA for your employees? Today, we’re sharing eight reasons why this should be a critical step in your business plan and why legal counsel is vital to getting started.

What Is a Non-Disclosure Agreement?

Before we dive into the many NDA benefits, let’s take a closer look at what an NDA entails. Other names for this document can include:

  • Confidentiality agreement (CA)
  • Proprietary information agreement (PIA)
  • Confidential disclosure agreement (CDA)

Regardless of the specific naming mechanism you use, every NDA’s goal is to ensure that every authorized person who signs the form does not share any protected information with a non-authorized party.

There are many instances where an NDA is more than just warranted but necessary. For example, when a business owner is ready to sell their business, they may enter into sales negotiations with several prospective buyers. During those conversations, they may need to share confidential data about their operations, from revenue figures to trade-secret formulas.

Each interested buyer must sign an NDA before those talks occur, preventing them from sharing the insights with others or trying to replicate the methods themselves. 

An NDA is essential if you deal with any information you want to keep within your company. Let’s look at eight reasons why this is one of the most critical business documents to have in place.

1. Safeguard Confidential Information with an NDA

When a business initiates an NDA contract, they have valuable or sensitive information they need to protect. This information can include:

  • Proprietary business processes
  • Trade secrets
  • Lists of clients
  • Client information
  • Marketing strategies

Employers want employees to refrain from sharing information like this with a competitor. They could take it when they leave and use the knowledge to start their competing businesses.

2. Set Employee Expectations

When required to sign an NDA, new hires know from the beginning which information is protected and can be freely shared.

The agreement sets a precedent that your company information is confidential and protected from day one. A business attorney help you create a thorough and complete NDA, ensuring the data is well-written and detailed.

3. Outline Legal Consequences for Breach of NDA

When they sign an NDA, employees will understand the consequences if they violate any terms of the agreement. They’ll know that doing so could lead to a lawsuit from their employer. They could also be required to pay financial damages and associated legal costs.

4. Secure Legal Recourse

Many states allow employers to file a misappropriation claim if an employee shares confidential data, such as a trade secret. While this process can be effective, it can also be time-consuming and complicated. In addition, it can be challenging to explain exactly what the defendant shared without exposing the confidential information to the public. 

If you have an NDA in place, you can pursue a breach of NDA claim instead. This legal remedy is often simpler to complete, with less risk of accidental exposure.

5. Keep Shared Information Private

Some trade secrets are never meant to leave the walls of a workplace. However, others must be shared with partners, vendors, and other third-party stakeholders with which a company does business.

When this is the case, an NDA can help ensure that confidential information shared between multiple parties does not leave those involved.

6. Maintain Comfort and Trust with an NDA

Strong employee relationships are the cornerstone of a successful business. When you know you can trust your employees (and vice versa), there’s a baseline level of comfort and security.

An NDA can help you secure and maintain that confidence. When written and presented correctly, your workforce can view it as a valuable relationship-building tool, not a punitive legal document.

7. Create a Team-Centric Workplace

With an NDA, everyone in your organization can work together to achieve a common goal. This goal might be creating a new, innovative product or fine-tuning the services you offer your community.

No one has to fear that confidential information will be shared or disclosed to a third party. This level of trust creates a culture of positivity and ingenuity around the office and a team-centered atmosphere.

8. Protect Early Project Planning

When you’re on the cusp of a new project, you want to keep the details as close to your company as possible. By asking employees and stakeholders to sign an NDA, you can ensure that those initial stages aren’t shared with anyone else.

Then, as you move further into the project’s operational phase, the agreement helps you maintain confidentiality. At the same time, you flesh out the details and work toward the final result.

Find Legal Assistance for Your NDA

As an employer, you know that your employees need access to certain types of mission-critical data. Yet, you also know that if some of those details left your organization, it could compromise your competitive advantage and long-term security.

This risk is why a non-disclosure agreement is such an important business document. However, to be effective, there are specific terms that your NDA must contain. Our business lawyers can help you draft an agreement that is complete, thorough, and customized to your company.

Contact us today to learn more and get started.

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