Protecting intellectual property is important for a startup business, but private business information should also remain within the business. Non-disclosure agreements are one way a new startup can protect itself.
Non-public information that should be protected by a non-disclosure agreement includes not only research and development, but time lines, internal communications, client lists, marketing plans, private information held by human resources, and any other business or employee information that would cause harm or loss if disclosed inappropriately.
For a non-disclosure agreement (NDA) to be binding, it needs to be legal, enforceable, and usually in writing. But, according to attorney Jake Posey, the people signing need to do so while not under duress or undue influence. It needs to spell out specifically the information that is protected and cannot be disclosed. It also needs to detail consequences if the NDA is breached.
Legality of an NDA means the provisions cannot direct the signer to break the law or overlook a crime or public health or safety hazard. An employee is both required by law and protected from retaliation if he or she reports a crime such as embezzlement or fraud. If that disclosure to law enforcement also requires protected information to be disclosed, that employee is not in breach of contract. Federal regulations from the EPA, OSHA, and the EEOC cannot be specifically excluded from a legal business contract.
If a signer reveals protected information covered under a non-disclosure agreement, they are in breach of contract, and may be liable for loss. The “privilege to disclose” is a legal definition of breaching an NDA in the event of crime or public safety or health.
Signing under duress is one legal avenue for signers to remove legal restrictions if they breach an NDA. Signing under duress, however, does not mean any consequences for not signing, but those involving threat to life or limb. It is common to make employment contingent on signing an NDA. This is not considered under duress.