If your employees will have access to confidential company information, it’s important to protect it. Having an employee sign a California non-disclosure agreement (NDA) is a good way to do so. An NDA typically prohibits employees from disclosing certain confidential information they learn or have access to during the course of their employment. Employers can add non-disclosure obligations to a broad employment contract, or create a standalone NDA.
If you’re hiring employees in California, your agreement with those employees must comply with California employment law. The best practices below will ensure your California NDA will be enforceable, and protect your company’s confidential information.
Here’s what you should know about California NDAs.
Who can use a California non-disclosure agreement?
Generally, it’s legal in California to have employees sign NDAs—but there are certain limits employers need to take into account. Following the best practices below will create an agreement that is more likely to be immune to legal challenges.
What are the best practices for drafting a non-disclosure agreement in California?
To draft a strong, enforceable California NDA, follow these best practices:
- Make sure you are protecting a legitimate business interest. Enforceable non-disclosure agreements generally must support a “legitimate business purpose.” Legitimate business purposes for NDAs usually involve protecting trade secrets or other confidential or proprietary information. When considering whether an NDA is appropriate, it’s important to take into account who you’re asking to sign. For example, a low-level employee with no access to confidential company information poses no risk to a company’s proprietary information. Therefore, there may not be a legitimate business purpose to having them sign an NDA. Best practices include limiting NDAs to only those employees who have access to confidential company information.
- In California, the confidentiality obligations should have time limits. California, like most states, encourages employers to set a time limit on how long the employee is subject to confidentiality. The agreement should provide a specific time period, such as “six months after employment ends.” Consider adding an exception for information that later becomes non-confidential. For trade secrets, time limits can generally be longer.
- Define your confidential information. The agreement should include a clear definition of confidential information that employees can easily understand. Avoid using legalese, so your employees know exactly what they are prohibited from disclosing to others.
- Include notice required by federal law. Federal law requires notice regarding immunity from liability for limited disclosures of trade secrets, under the Defend Trade Secrets Act of 2016. Whenever you create an employee NDA or a contract including non-disclosure obligations, you must include this notice.
- Include important exceptions to your definition of confidential information. Ensure that your definition of confidential information isn’t so broad that it encompasses information that is not actually confidential. For example, common examples include information publicly known or available at the time of disclosure, or information that was already disclosed to the employee without confidentiality obligations.
- Exclude information related to unlawful employment practices from the definition of confidential information. California NDAs cannot prevent employees from disclosing facts related to harassment, discrimination, and retaliation claims based on any protected category under Section 12940 of the Government Code. This includes sex, national origin, race, disability, and religion, among other protected classes.
Discover SixFifty’s California NDA solutions
Keeping up with California’s employment laws can be time-consuming and expensive, especially if you’re hiring employees in more than one state. However, ensuring your NDAs and other employment agreements are enforceable is important. If your agreements fail to comply with California law, they may put your company’s confidential information at risk.
Creating an enforceable California NDA requires knowledge of the latest developments in NDA law, at both the state and federal levels. Instead of asking your in-house legal team to draft an NDA, or seeking outside counsel, SixFifty can do the hard work for you.
We make creating and maintaining employment and corporate legal documents simple and easy, with the only automated legal expertise platform built for businesses. All you need to do is answer a few questions, and download the automatically generated document.