California is Employee-Friendly Regarding NDAs
Three things have to occur before a non-disclosure agreement is enforceable
on May 1, 2019
Updated on May 23, 2022
Say you’re about to start a job and they ask you to sign a non-disclosure agreement. Do you sign? Not sign? When do you reach out for legal advice from an attorney?
“This is where the legal versus the practical collide,” says Tamara S. Freeze, an employment law attorney at Workplace Justice Advocates in Irvine. “Because if you want the job, most employees are just going to sign it. They’re not going to read it, but even if they did, they’re not going to understand the scope. It may seem like a condition of employment.”
This is precisely why, any time you receive a legal document, especially employment agreements, to sign you should have a California attorney look it over, says Jonathan J. Delshad, with an eponymous law firm in LA. “First, to understand the terms and know the boundaries of what you can and can’t disclose, and secondly, to make sure you’re not getting taken advantage of. An example could be a former employee who receives an offer to work for another employer and is subsequently threatened from working at the new job because the NDA prohibits them from doing so.”
NDAs are often in legalese and, in some cases, their scope is unclear, Freeze says. “It just says, ‘You’re not allowed to disclose confidential information or trade secrets to a third party,’ but doesn’t define what that specific information is. A lot are cookie-cutter templates.”
If it’s vague, it’s likely not enforceable, Freeze adds. She also says three things have to occur before an NDA or non-compete can be enforced:
There has to be well-defined, confidential information…
Which is then disclosed to a third party…
Which then does provable harm to the employer
For workers who are only privy to everyday workplace functions, which is most of us, the NDA is less relevant because the level of harm is low. But harm is far easier to prove for engineers and high-level employees, Freeze says. “The classic example is the person working for Coca-Cola who shares the formula with Pepsi. But in the real world, for a standard employee working for a standard employer, harm is difficult to show and measure.”
Indeed, very rarely will an employer file a lawsuit against an employee for violating an NDA. “It’s expensive, so the damage has to be real,” Freeze says. “But sometimes an employer wants to make a statement and gain leverage.” Even in those rare cases, disputes are often settled out of court or sometimes dismissed by the court.
“If you were a high-level engineer at Apple who began a startup that is implementing novel intellectual property or some innovation, you should be very aware of your rights. It’s probably a good idea to go to an attorney and have them explain it to you—and specifically define for you what they’re protecting and what you can’t talk about,” Freeze says. “But if you’re a bus driver or cashier, an NDA is probably nothing and, chances are, no one is going to enforce it against you.”
And as of January 2019, an amendment to the Fair Employment and Housing Act has invalidated NDAs when it comes to one area of law: sexual harassment claims. “You cannot force an employee to sign a settlement agreement for a confidentiality,” Freeze says. “They have a right to go public with the details and factual information, and prevent California employers from paying to make it private and hush-hush. It’s in the public interest for everybody to know.”
For more information about this area, see our overview on labor law.