No matter how great a company is, employee turnover is inevitable. Employees switch jobs for any number of reasons, and undeniably they leave their positions with far more knowledge about their employer, its practices, and, possibly, its trade secrets. Companies can (and often do) require employees to sign nondisclosure agreements to ensure their former employees do not use this "on-the-job education" to a competitors' benefit.
Because they do not restrain trade, like their cousins the non-compete agreement, Texas courts generally find nondisclosure agreements enforceable. However, like non-compete agreements, nondisclosure agreements should be specific in scope, meaning companies cannot prohibit employees from disclosing any of the information they learn during the course of their employment. Rather—to be enforceable—nondisclosure agreements should specifically define or identify the information the employer considers confidential or a trade secret.
This need for specificity conflicts with the prevailing belief that a broad definition of confidential information provides more flexibility and, thus, more protection. On the contrary, an overly broad scope can confuse an employee about which information actually falls under the nondisclosure agreement and needs protection. This confusion will likely lead a former employee to disclose protected information without realizing it was confidential. When faced with the difficulty of narrowly defining information that is still in development or information that changes over time, companies should classify the protected information comprehensively or by category.
Overall, clearly identifying confidential information benefits companies and offers greater protection from inadvertent disclosure. Employees are more likely to protect confidential information if they understand their obligation. In addition, if the definition is overly broad and sweeps in information readily available in the public domain, a company may have difficulty convincing a court that the disclosed information constitutes a trade secret. Further, if an employee unlawfully reveals confidential information, a judge and jury can more easily impose sanctions when the confidential or trade secret information was defined precisely and clearly, and the employee knew, or should have known, that its disclosure was prohibited.
More is not always better when drafting nondisclosure agreements. Improving specificity leads to greater predictability in how information will be handled. While companies cannot prevent employees from leaving, by carefully drafting nondisclosure agreements, they can control what information employees who leave hand over to their competitors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
