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What do you need for a valid confidentiality agreement?

The confidentiality agreements (often referred to as nondisclosure agreements or NDAs) that you have employees sign need to hold up in court, if challenged. Otherwise, they are basically worthless. That's why do-it-yourself agreements like those you can download from websites aren't a good idea. It's best to have your attorney help you draft them and make sure that they address your specific goals and needs.

There are a couple of important elements that need to be present for a confidentiality agreement to be valid. Let's look at those.

They require "consideration"

That means the person who's being asked to sign it is getting something in return for promising confidentiality. If you require all new employees to sign one, the job itself would be what they're getting. The same could be said if you require all vendors to sign one. They're getting your business in return.

They need to be reasonable

They can't be too broad. For example, the confidentiality typically wouldn't apply to information the employee already has or that's available to anyone who wants to look it up. The agreement can't place an undue burden on the employee that signs it.

For example, it would typically apply only as long as the information needed to be kept confidential. If the agreement deals with how a product is made, and that product is eventually discontinued, one could argue that the employer no longer has a legitimate business interest in maintaining secrecy about it.

Some of the most common reasons that confidential agreements are deemed invalid involve being unreasonable, too broad or too burdensome.

Employers often require employees to sign confidentiality agreements or NDAs because they're going to be privy to information they don't want their competitors to have and/or don't want confidential client information to get out. Sometimes, when people (particularly well-known people) hire housekeepers or nannies to work in their home, they require them to sign these agreements because they don't want information about themselves or their families seeping into the public sphere.

Whatever your reason for drafting a confidentiality agreement, it's worthwhile to consult with an attorney with experience in business contracts. They can also help if you need to challenge or defend an agreement.

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