Tuesday, February 25, 2020

Non-Disclosure Agreements: An Overview

If you watched the Democratic debate last Wednesday, you heard a lot about non-disclosure agreements. In the days following, Elizabeth Warren has been pressuring Michael Bloomberg to release former employees from non-disclosure agreements. With all this talk about non-disclosure agreements, many people might be wondering what exactly a non-disclosure agreement is?

A non-disclosure agreement is an agreement between two or more parties where one or more parties agree to keep some information confidential. These are often used by employers as part of the agreement to settle a lawsuit by an employee before it has been brought. The employer wants the employee to sign the non-disclosure agreement to keep the employee’s allegations against the employer confidential. Even if these allegations are untrue, employers may not want to go through the time, expense, and potentially negative publicity of a lawsuit and choose to settle instead. The non-disclosure agreement ensures that the employee’s allegations are not made public and therefore become damaging to the employer’s reputation. Even after a lawsuit has been brought non-disclosure agreements are usually part of the settlement agreement to keep the terms of the settlement confidential.

Employers sometimes insist that employees sign non-disclosure agreements before they begin working to keep the employer’s trade secrets or other private information confidential. Even though it is illegal in Illinois for an employee to disclose a trade secret, a non-disclosure agreement can provide an employer with broader protection than the Illinois Trade Secrets Act. These agreements can also require the employee to pay a certain sum of money (called liquidated damages) upon the disclosure of the trade secret.

If an employee violates a non-disclosure agreement the employee generally must compensate the employer for the damage caused by the disclosure of this information. The employee generally must also pay the employer’s attorneys’ fees and costs if the employer has to file a lawsuit.

Employers need to be careful not to make non-disclosure agreements overly broad. If an agreement prevents an employee from getting a new job or prohibits the employee from discussing information that the employer has no reason to keep confidential, Illinois courts may refuse to enforce the agreement.

Additionally, the Workplace Transparency Act, which took effect on January 1, 2020, restricts the manner in which employers can use non-disclosure agreements. Employers must provide employees who claim to be the victims of sexual harassment with the opportunity to hire an attorney to review the non-disclosure agreement. The employee has 21 days to consider the settlement agreement and 7 days to revoke his or her signature.

Therefore, employers should consult an attorney before drafting a non-disclosure agreement. We have experienced employment attorneys who have drafted many non-disclosure agreements for our clients, so please do not hesitate to contact us (email: mdicianni@ancelglink.com; phone: 312-604-9125) if you would like us to draft an agreement for you.