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Contracts in business law: non-disclosure agreements

In a blog post last week, we talked with our readers about non-compete clauses and the legal issues they could create for businesses who try to enforce them in states, such as California, where such covenants are considered void. We brought up the topic because of the national sandwich chain Jimmy John's, which has fallen under scrutiny for its use of such restrictive employment clauses.

But as we also explained last week, non-compete clauses, which generally are not allowed in California, are not to be confused with nondisclosure agreements which are allowed. So, just as we did last week with non-compete clauses, we will explain what a nondisclosure agreement is and how they apply to both a business and the employee who agrees to this contractual clause.

As you may already know, there are some businesses that rely on their trade secrets in order to maintain their edge in their respective industry.  If their competitors were to discover their secret, profits could be lost.  This is where nondisclosure agreements come into play.  They create a legally binding duty between an employee and an employer to keep company trade secrets confidential both during and after employment.

Because signing a nondisclosure clause is legally binding, violating the terms of this agreement could be grounds for termination, which is something employees should be aware of.  It's also worth pointing out that a business may take legal action against an employee who violates a nondisclosure agreement.  The employer, under California law, "may recover damages for the actual loss caused by the misappropriation."

Even though damages may be sought in a civil lawsuit, it's important to remember that a breach of a nondisclosure clause can be difficult to prove, which is why seeking the help of an experienced and knowledgeable attorney may be necessary.

Sources:  FindLaw, "A Nondisclosure Agreement," Accessed Oct. 27, 2014

The California Civil Code, "Section 3426-3426.11," Accessed Oct. 27, 2014

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