Non-disclosure agreements (NDAs) are common in certain industries where you could be exposed to confidential business information or trade secrets. The purpose of an NDA is simple: to keep you and others bound by the agreement from sharing the information covered by the agreement.
If you violate an NDA, you may have to pay monetary damages or face other undesirable consequences. It is essential to learn to recognize the signs of an unreasonable NDA to avoid potential issues in the future.
Be Cautious About Signing an NDA
Non-disclosure agreements are generally upheld as valid and enforceable by Texas courts as long as the terms of the contract are reasonable.
However, by the time a court steps in and declares an NDA’s terms to be unreasonable, you may have already faced consequences if your employer alleges you violated the NDA. For example, you may have been assessed penalties or terminated from your job.
It is crucial, then, that you review the terms of the agreement carefully if your employer approaches you about signing an NDA. The knowledgeable Houston employment attorneys at Armstrong & Associates will be able to accurately evaluate your agreement for any problematic elements.
Hallmarks of an Unreasonable Non-Disclosure Agreement
There are several common characteristics that attorneys and courts look to in determining if a non-disclosure agreement is unreasonable. Five of these characteristics include:
1. You Are Rushed into Signing the Agreement
You should be given an adequate opportunity to review the NDA before signing it. The amount of time that is considered sufficient depends on the length and complexity of the agreement itself. But if your employer tells you that you must sign the agreement immediately, or within the hour, this may indicate that the NDA is problematic.
2. You Are Denied the Opportunity to Speak to an Attorney
Along with a chance to review the NDA before signing it, you should be given an opportunity to visit with an attorney of your choosing about the agreement before you have to sign it. An employer who tells you that you cannot speak to an attorney first or makes it difficult to do so is usually trying to hide terms that would be legally suspect.
3. The Agreement Covers Too Much Information
An NDA is meant to protect confidential business information, certain private conversations, and other subject matter that could irreparably harm your employer if made public.
However, an NDA that protects “all” information or “all” conversations, or that is overbroad in its scope, should prompt you to discuss the NDA with an attorney before signing.
4. There Is No End Date to the NDA
It is abnormal, although not inherently unreasonable, for an NDA to last indefinitely. However, you should be very cautious if you are presented with such an agreement. It is possible that, by signing such an agreement, you could face serious legal repercussions for disclosing information even after it has already been made public in some way.
5. The Proposed Damages for a Breach Are Excessive
Pay particular attention to the consequences of a breach that are described in the NDA. Often, an NDA will call for liquidated damages — or a set monetary penalty — if you breach the agreement. Your employer sets the amount of liquidated damages based on an estimate of what your employer believes the harm of a breach would be for them.
Although employers have some leeway to set liquidated damages in an amount they feel is warranted, they cannot set an unreasonable amount. If your NDA seems unreasonable, consult with an attorney before agreeing to such a term.
What to Do if You Believe an NDA Is Unreasonable
While Texas courts will not enforce NDAs they believe to be unreasonable, a safer path is to have the NDA modified before you sign it, as opposed to trying to avoid consequences for a breach of an agreement you already signed.
If you do not have a good feeling about your employer’s NDA, do not sign it. Having a qualified Houston employment law attorney review the NDA for you can protect you against future problems. Call or contact the firm of Armstrong & Associates today to schedule your initial consultation.
