Looking Out For Your Career

Why do companies use non-disclosure agreements?

On Behalf of | Oct 5, 2021 | Noncompete Agreements

If you sign a non-disclosure agreement (NDA), you have to honor it. You have a legally binding contract saying that you will not give up information that you know. You may take on a new job — this is different than a non-compete agreement — but you have to keep that information to yourself. 

If you fail to do so, there can be serious ramifications. If your former company misses out on a business because of what you did, they may consider you liable for that revenue loss. Why would a company have an agreement like this in place?

Protecting confidential information 

An NDA is not about the revenue directly, but it is all about protecting sensitive information. These company secrets are what makes the company so profitable, and they cannot allow the competition to know exactly how they’re operating, or they risk losing that edge. 

For instance, your current company could have some technological advantage or a type of software that was built in-house for the industry. It works better than commercial alternatives, which are used by the competition. If you go to the competition and provide the company with that software or offer insider information about how the system works, that can violate the NDA. 

What do you need to know?

If you have signed an NDA and you want to move forward in your career without violating it, you must know exactly what legal obligations you have and what steps to take. For instance, you need to know exactly what information the NDA covers, how long it lasts and if it is legally enforceable under current laws.