What distinguishes an NDA from a non-compete agreement?

On Behalf of | Mar 24, 2022 | Employment Litigation |

Ideally, a non-compete agreement prevents one of your employees from working for a competitor for a period of time. However, enforcing a non-compete may prove challenging since an ex-employee might contest the agreement in court. Your worker may argue that he or she signed an NDA and not a non-compete.

Business owners should fully understand the kinds of agreements they require their employees to sign. An NDA might appear to be the same as a non-compete agreement, but the two are actually quite different.

Defining an NDA

An NDA is a non-disclosure agreement. The Motley Fool explains that it prohibits an employee from revealing sensitive information about a company. A common use of an NDA would be to prohibit your workers from disclosing trade secrets from your company. NDAs commonly name the parties bound to it, the information that should remain confidential, and the time period for the NDA to be in force.

However, an NDA does not prevent your employee from working for another employer. Your worker cannot reveal information prohibited by the NDA, but the NDA does not restrict where your employee can work. By contrast, your non-compete may keep your employee from working for a competitor but it might not have a provision to prevent your employee from disclosing information.

Using NDAs and non-competes together

Generally, businesses have their employees sign both an NDA and a non-compete to ensure that they fully protect themselves from unfair competition. This is why business owners look to experienced attorneys to look over their agreements to make sure there are no gaps like a lack of an NDA that might cause litigation with a former employee in the future.