Navigating Non-Disclosure Agreements (NDAs) in Employment Settings

Non-Disclosure Agreements (NDAs) are common in employment contracts, particularly in industries where confidential information is a key asset. These agreements are designed to protect proprietary business information, trade secrets, and sensitive employee or client data. However, NDAs can also raise concerns about enforceability, employee rights, and compliance with evolving laws in New York. Whether you are an employer drafting an NDA or an employee asked to sign one, understanding the scope and limitations of these agreements is crucial.

What Is a Non-Disclosure Agreement?

A Non-Disclosure Agreement is a legally binding contract that restricts employees from disclosing certain information they learn during their employment. NDAs typically cover:

• Trade secrets – Proprietary business formulas, methods, or practices that provide a competitive advantage.
• Confidential business information – Financial records, business strategies, and operational processes.
• Client and customer information – Contact details, preferences, and sensitive communications.
• Employee data – Personal information, compensation structures, and HR records.

NDAs can be standalone contracts or included as clauses in employment agreements, severance packages, or settlement agreements. Employers use them to safeguard their business interests, but New York law sets important boundaries on their use.

Enforceability of NDAs in New York

While NDAs are widely used, not all agreements are legally enforceable. In New York, courts scrutinize NDAs to ensure they are reasonable in scope, duration, and purpose. Key factors that determine enforceability include:

• Legitimate business interest – Employers must show that the NDA protects actual business interests, not just restricts employee mobility.
• Limited scope – Overly broad NDAs that attempt to cover all workplace knowledge may be deemed unenforceable.
• Reasonable duration—Courts typically uphold NDAs that last a reasonable period, such as one to three years after employment.
• Clarity and specificity – Vague language that burdens employees excessively is often struck down.

Employers should ensure their NDAs are narrowly tailored to avoid legal challenges, while employees should seek clarification before signing any agreement.

Legal Challenges and Limitations of NDAs

Recent legislative changes have imposed new restrictions on NDAs, particularly in workplace misconduct cases. Under New York law:

• NDAs cannot prevent employees from reporting discrimination or harassment – Following the #MeToo movement, laws have been enacted to avoid NDAs from silencing victims of sexual harassment or discrimination.
• Limits on NDAs in settlement agreements – Employees must be given at least 21 days to review an NDA before signing any discrimination settlement, with an additional 7-day revocation period.
• Whistleblower protections – NDAs cannot prohibit employees from reporting unlawful activities to government agencies.

These restrictions ensure that NDAs serve legitimate business purposes without infringing workers’ rights.

Best Practices for Employers Drafting NDAs

Employers should take a strategic approach when drafting NDAs to maximize enforceability and compliance. Best practices include:

• Clearly define confidential information. Avoid broad, ambiguous language that could be challenged in court.
• Setting reasonable time limits – NDAs should specify a duration that aligns with industry norms and legal precedent.
• Including exceptions – Clarify that employees may disclose information when legally required or to report unlawful conduct.
• Ensuring voluntary agreements – In settlement cases, allow employees sufficient time to review the NDA with legal counsel.

Employers can protect their business interests by crafting fair and legally sound NDAs while minimizing litigation risks.

What Employees Should Know Before Signing an NDA

Employees asked to sign an NDA should:

• Understand the terms – Review what constitutes confidential information and how long restrictions last.
• Negotiate unreasonable clauses – Employers may be open to modifying overly broad terms.
• Seek legal advice if unsure – Consulting an attorney can help clarify potential risks before signing.
• Know their rights – No NDA can prevent an employee from reporting illegal conduct or cooperating with investigations.

Employees should not assume NDAs are non-negotiable, particularly if they impose broad restrictions on future employment or personal rights.

Talk to an Employment Lawyer About Your NDA

Non-disclosure agreements play a vital role in protecting business interests, but they must be carefully crafted to align with New York’s evolving legal landscape. Employers should ensure their NDAs are specific, reasonable, and compliant with employment laws. Employees, meanwhile, should fully understand their rights and seek legal guidance when necessary. Whether you are an employer drafting an NDA or an employee evaluating one, talk to an experienced employment lawyer.