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Nondisclosure agreements: 5 common uses

Employees are often asked to sign nondisclosure agreements when they're hired. In essence, the owners of the company understand that employees need access to certain sensitive information in order to be effective, but they also know that employees come and go. They don't want them to take valuable information that the company holds with them when they leave.

Five common things that nondisclosure agreements protect include:

  • Personal health information for patients, if used in a medical or laboratory setting.
  • Information that may be embarrassing to members of the company, even if it is not illegal -- such as a consensual and yet extramarital affair.
  • Important trade secrets that give the company an edge and perhaps give it the lion's share of its overall value. Examples could be everything from sales leads to recipes in food production.
  • Any information about new developments, from potential investors to new inventions.
  • Sensitive intellectual property that the company has to share with contractors, employees, business partners and others.

For instance, an employee may need to know the exact process that is used to make the company's main product. However, the best way to stop competition is to not let the knowledge of that specific process leave the company. The nondisclosure agreement can help to ensure that the employee does not sell that information to a third party or leave the company and start a competing business using what they learned on the job.

When employees sign nondisclosure agreements, they then have a legal obligation to uphold them. If they breach them in the future, it's important for those who suffer financial harm to know what options they have.

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