When your employees have access to confidential company information, you can protect that information by having the employee sign a Texas non-disclosure agreement (NDA). These agreements generally prohibit an employee from disclosing specified confidential information that the employee learns or has access to during the course of their employment. Non-disclosure obligations can be a separate contract, or included in a broad employment contract.
If you hire employees in Texas, your non-disclosure agreements with those employees must comply with Texas law. There are a few best practices you should follow, which will ensure your Texas NDA protects your company’s confidential information and will be enforceable in court.
Here’s what to know about Texas NDAs.
Who can use a Texas non-disclosure agreement?
In Texas, it’s generally legal to have employees sign NDAs. However, there are several limits employers should be aware of. There are also best practices to follow, which will make the agreement stronger.
What are the best practices for drafting a non-disclosure agreement in Texas?
These best practices will help you draft a strong Texas NDA:
- Make sure you are protecting a legitimate business interest. Enforceable NDAs typically need to protect a legitimate business interest. Employment NDAs commonly protect trade secrets or other confidential or proprietary business information. Because of that, NDAs should generally be limited to employees with access to confidential company information. Asking low-level employees with no access to trade secrets, proprietary, or otherwise confidential information to sign an NDA is usually not supported by a legitimate business purpose.
- In Texas, the confidentiality obligations cannot be indefinite. Generally, Texas frowns upon indefinite confidentiality obligations. To ensure your agreement is enforceable, consider adding a limit to the employee’s duty to keep information private. Some NDAs only cover the time period during employment, while others may extend the confidentiality for a finite period after employment ends. Typically, a longer duration is appropriate for information that qualifies as a trade secret.
- Define your confidential information. Be sure to include a clear definition of confidential information, while avoiding legalese. This ensures your employees will know exactly what they’re 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. Every employee contract with non-disclosure provisions or standalone NDAs must include this notice.
- Include important exceptions to your definition of confidential information. It’s crucial your definition of confidential information is not so broad that it encompasses non-confidential information. For example, it’s common to include exceptions for information that was already available to the employee at the time of signing, public information, or information that became public information after signing the NDA.
- Consider excluding information related to unlawful employment practices from the definition of confidential information. Although Texas does not specifically require this yet, it’s a growing trend at both the state and federal levels. NDAs which prohibit employees from disclosing unlawful employment practices, like discrimination or harassment, are increasingly considered unlawful. Promote a positive, inclusive company culture, and stay ahead of the legal curve, by including this exception.
Discover SixFifty’s Texas NDA solutions
Staying on top of federal and Texas state employment laws can be time-consuming and expensive, especially when you’re hiring employees in more than one state. Nevertheless, ensuring your NDAs and other employment agreements are legally enforceable is important. If your NDA provisions don’t comply with Texas state law, they may be considered unenforceable. That needlessly puts your business at risk.
Creating enforceable Texas NDAs requires careful thought and up-to-date knowledge of NDA law at both the federal and state levels. Instead of having outside counsel or your in-house legal team draft an NDA, SixFifty can do the heavy lifting for you.
Drafting and updating employment and corporate legal documents is simple and easy with the only automated legal expertise platform built for the enterprise. All you have to do is answer a few questions and download the automatically generated document.