Have you signed an NDA recently? When you did, were you confident that NDA was legal? Companies must follow strict guidelines when requiring employees, contractors, and freelancers to sign an NDA.
Non-disclosure agreements, more commonly referred to as NDAs, are contracts that prevent a party or parties from sharing sensitive information. They’re often used in employment contracts to prevent confidential information or trade secrets from leaking to others.
For example, a pharmaceutical team working on a new prescription drug to cure the common cold would need to sign an NDA. The goal would be to prevent any workers who decide to leave and take a new job with the competition from sharing trade secrets and formulas. That’s why NDAs exist.
There are different types of NDAs. A freelance worker may be required to sign one type, while in-house employees sign others. They can include:
- Employer/Employee – Requested when a new employee joins a company as a way to protect trade secrets and confidential information from being shared with others
- Merger and Acquisition – Protects against the leak of information when a merger or takeover is about to happen
- Mutual, Bilateral, or Multilateral – Two or more parties have confidential information to protect
- One-Sided or Unilateral – One party discloses confidential information and wants it protected
- Personal NDAs- – Often used for contractors, freelancers, or temporary staff
Not every NDA is legal. California’s changing laws have eliminated employers from using NDAs in certain situations. If you’ve signed an NDA or confidentiality agreement, it may violate your rights.
How the STAND Act Changed Things
In 2018, the #MeToo movement led to California’s SB 802. This bill banned the use of NDAs in settlements resulting from sex discrimination, sexual assault, or sexual harassment in the workplace. The law only covered workers if the NDA was related to one of those three situations.
It didn’t protect workers from NDAs related to gender, age, religion, disability/mental health/medical condition, genetic information, military/veteran status, marital status, or racial discrimination. A company could refuse to hire someone based on their age and get sued for age discrimination. The same company could then offer a settlement and require that person to sign an NDA when claiming the money. The news of that discriminatory behavior never gets shared as a warning to others.
On January 1, 2022, SB 331 went into effect. The STAND Act now covers NDAs in separation and settlement agreements. If a worker files any discrimination or harassment claim and is awarded a settlement, the company cannot require the worker to sign an NDA. The worker is free to speak about the situation to anyone.
NDAs can still be used to protect confidential company information, such as proprietary information and trade secrets. Those NDAs cannot relate to the discrimination complaint, however.
Recent Judgments Regarding NDAs
One of those recent cases helped get The STAND Act updated. A manager at a major firm was shut out from all of her files, documents, and emails after filing a wage discrimination and retaliation complaint with her employer. She couldn’t talk to anyone about why she was forced to leave due to the NDA she’d signed. She would have had the right to speak out if she’d been the victim or witnessed gender harassment, sexual harassment, or sexual abuse in the workplace, but the existing laws did not protect race discrimination.
Sometimes, NDAs are so restrictive that they make it hard for workers to discuss their job duties. If they’re applying for other career opportunities, the applicants feel restricted from talking about where they worked or what they do. That puts them into the territory of non-competes, which are illegal in California.
NDAs must be clearly worded, and they cannot be overly restrictive. One recent case involved an employee of a major tech company whose NDAs restricted employees from sharing much about their jobs. It led to workers being unable to use the information when seeking new career opportunities. The judge found that the NDA wording was too vague and essentially created a non-compete clause. California does not allow non-compete clauses.
Do Contractors Have to Sign NDAs?
What if you’re a contractor and are asked to sign an NDA that keeps you from discussing things you see inside the company. Again, the NDA can only limit you from speaking about proprietary information and trade secrets. If the NDA forbids you from sharing that you were working for the company, it enters the territory of being a non-compete.
It would be best if you asked for clarification, however. Sometimes, NDAs prevent freelancers and contractors from saying they worked for that company. You’ll lose a reference on your resume, so you need to consider that NDA carefully.
What Happens If You’re Asked to Sign an NDA?
Suppose you’re involved in a discrimination complaint and win a settlement. You’re presented with an NDA and told you must sign it. Don’t. Contact an expert in employment law. The company is violating your rights, and you’ll want guidance on what to do next.
In fact, the settlement agreement needs to make it clear that you have the right to talk to an attorney before you sign anything. You have five business days to read it over and decide if you want to sign it.
Make sure you talk to an attorney you choose. One company pushed its employees to speak to attorneys of the company’s choosing. They then used attorney-client privilege from allowing authorities to talk about the discrimination complaints. The company also had employees sign NDAs stating that they’d first talk to the company to determine how much they could tell others.
Some things are still allowed to be protected from sharing with others. You may not be able to tell others how much you received in the settlement. It covers the name of the victim of harassment from being shared. Trade secrets and proprietary information are also protected.
Choose the Best Attorney for Your Needs
Don’t let your employer or former employer dictate who you talk to. You’re allowed to choose an attorney you prefer. If you choose an attorney with a conflict of interest, that attorney will tell you upfront. When you call, ask if you can have a free consultation, ask if the attorney specializes in NDAs and workplace discrimination, and ask how much trial experience the practice has had.
It’s in your best interest to talk to an attorney regarding any NDA you’re offered, especially if you’re not sure what you’re signing. If you’re retiring and are told you need to file an NDA, you need to know what you agree to.
Shegerian Conniff specializes in employment discrimination and workplace rights. It’s best to ask when you’re not sure what an employment contract or NDA says. Call Shegerian Conniff to schedule a free consultation. Learn more about your rights and what to do if you’re asked to sign an NDA.