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What is a Nondisclosure Agreement?

A nondisclosure agreement, also known as a confidentiality agreement, creates a contract between the party who discloses the private and sensitive information, and the people who must conceal it.  The disclosing party requires the receiving party to refrain from releasing or using the confidential information and/or trade secrets.  What is confidential information?  It’s any data that a party wants to keep secret, and puts effort into doing so.  What is a trade secret? It’s a practice, procedure, method, creation, design, pattern or formula that isn’t generally known to the public, and is usually concealed.

Who uses a Nondisclosure Agreement?

Generally, startup company owners looking for investors or potential business partners request them to sign a confidential agreement before they give them details regarding their products or services.  Many times the startup company owners fear that the investors or potential business partners may try to steal their ideas.   Also, entrepreneurs who need to discuss proprietary or sensitive matters with outside individuals may ask them to sign a confidentiality agreement.  Business owners who wish to hire employees may request them to sign nondisclosure agreements to ensure that their workers don’t leave with the business owners’ exclusive ideas or procedures.    

What are some of the Limitations of a Nondisclosure Agreement?

A nondisclosure agreement is effective when the receiving party has access to confidential information or trade secrets that he didn’t have prior knowledge of.  Additionally, a nondisclosure agreement usually doesn’t cover data that is publically known, such as a formula for glue or a common quilt pattern.  Although the confidentiality agreement may deter an individual from disclosing or using private and sensitive information, it doesn’t hinder a person’s right to engage in employment opportunities that require the use of general knowledge, skills or abilities.

What are the Obligations of the Receiving Party?

The receiving party has an obligation to keep the confidential information and trade secrets private.  It must have a good understanding of what the disclosing party considers clandestine.  Additionally, it has to safe guard confidential information and trade secrets, and keep them away from unauthorized people.  Also, the receiving party must ensure it doesn’t use them.  It can’t benefit from the secretive data, facts or figures, and get a business advantage or financial gain for itself.

Once upon a time, business owners hired employees over handshakes.  Nowadays employers are more sophisticated, and they use written documents.  Those inked instruments are usually referred to as offer letters.

An offer letter is a short, informal proposal of employment which sets forth the terms of the position, such as, job title, start date, salary, supervisor’s name, work duties, conditions of employment and employment relationship.  Employers usually give offer letters to lower to middle level employees.

Some small business owners use employment agreements, which contain much of the same information as offer letters.  However, they include a few more significant details.  They specify that employment is for a certain amount of time, the circumstances of termination from employment, severance pay, more in depth benefits and restrictive covenants.  Employers often give employment agreements to higher level employees, such as, executives and specialized professionals.

Small business owners should know the difference between offer letters and employment agreements, and when to use them.  Since offer letters specify that the employment relationship is at-will, meaning that the employer and employee both have the right to terminate employment for any reason or no reason, with or without advance notice, employers may want to give them to lower to middle level workers so that employers have the flexibility to dismiss them if they are not a good fit.  On the other hand, since employment agreements are for a fixed period of time and include more fringe benefits, small business owners may want to use them to attract higher level professionals who are in demand and harder to find.

A word of caution.  Whether an employer chooses to use an offer letter or employment agreement, it must be aware of the document’s contractual implications.  Many employees have successfully brought breach of contract claims against their employers for either stating or implying in the agreement that the employee would get a raise or promotion, and he later does not.

In conclusion, employers are free to choose offer letters or employment agreements when extending job offers to new hires.  However, they should analyze the circumstances to determine which is better, and make sure that they do not state or imply a promise that they will not later honor. 

New year, new issues. Wrong!  Employers will still face some of the same problems that they had in the past.  The Family Medical Leave Act (FMLA) provides many great benefits to working people and their family members; however, it is also a source of confusion and anxiety for many human resources departments and small business owners. 

Let’s start with the basics.  What is FMLA?  According to the Department of Labor, it entitles eligible employees of certain employers, including companies with fifty or more employees, to take up to twelve weeks of unpaid, job-protected leave in a twelve month period for any of the following reasons:

• the birth and care of a newborn child within one year of the child’s birth;
• the placement and care of a child for adoption or foster care;
• to care for the employee’s spouse, child, or parent who has a serious health condition; or
• when a serious health condition causes the employee to become unable to perform the essential functions of his job; or
• any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is on covered active duty.

An eligible employee who is a service member’s spouse, child, parent or next of kin (military caregiver) is eligible to twenty-six weeks of leave during a twelve month period to care for the covered service member with a serious injury or illness.

Intermittent Leave Frustrations

Some employers feel like FMLA is a burden on the company, but they view intermittent leave as even more troublesome.  When employees take leave, some employers believe that business will suffer due to the lack of “hands on deck”.  When employees take intermittent leave, employers may not know how many people will come to work on time or show up at all.  Also, when employees get to the workplace, they still have the ability to leave early due to their medical conditions.  An unpredictable workforce makes operating a business a big struggle.  

Some Relief

There is good news!  Employers have rights under FMLA too.  An employer may require employees to take FMLA for the birth, adoption or foster case placement of a child in increments of time up to twelve weeks rather than intermittently.  However, the employer has to allow its employees and their family members with serious health conditions to take intermittent leave when medically necessary. Thus, employers do not have to worry that every single employee will try to get sporadic leave, and come to work as they please, it is only available for those who really need it.

Additionally, it is a good idea that when an employee requests leave in order to care for himself or a family member, the employer require the employee to obtain a medical certification that includes the date the serious health condition started, the likely duration, and the relevant facts regarding the medical injury or illness, such as the treatment plan.  The employer should always require a certification so that it will have an idea of the times that the employee may be absent from work.    

Employers should inform their employees that they have to provide no less than a thirty day notice to their employer about the need for foreseeable leave.  Also, small business owners and companies should tell their workers that they have a duty to try to schedule medical appointments and treatments at times that cause the least disruption to the operations. These requirements can help the employer obtain a better understanding of the comings and goings of its workforce.    

Another helpful strategy for the employer is when an employee requests a foreseeable intermittent leave, it can require the employee to temporarily transfer to an available alternative job.  The worker must be qualified for the position, and it must contain the same pay and benefits. The alternative job should better accommodate the employee’s need of reoccurring leave than his original position. This strategy may help the employer better manage its employees when they work irregular hours.

Employers should not dread the pesky intermittent leave; they should make themselves aware of their rights under FMLA.

The news is full of stories about new businesses forming in Texas.  We hear of companies relocating from others places to the state as well. There are various reasons for them coming here. Some people say Texas is “business friendly” with low corporate taxes, a vast infrastructure and highly skilled workers.

Well, when the employees arrive at their new jobs, they may face a surprise.  Some employers will require their new hires to sign covenants not to compete or non-competition agreements.  The contracts prohibit departing employees from working in a competing business for a certain length of time within a certain geographical area. 

Purpose of a Covenant Not to Compete

Texas has a culture of promoting business and competition.  Generally, it does not restrain business mobility; however, the covenant not to compete is an exception.  Still, in order for courts to enforce a covenant not to compete it has to meet strict requirements.

A Valid Covenant Not to Compete

Section 15.50(a) of the Texas Business & Commerce Code contends “a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promise.”  (Covenants not to compete in the medical field are covered under different standards).

Reasons for Having a Covenant Not to Compete

Some employers want their employees to sign non-competition agreements for the following reasons:

1. They wish to guard their clients’ names and information.
2. They want to safeguard proprietary training methods.
3. They desire to protect confidential trade secrets.

Although Texas is a great state for the free movement of business and competition, a covenant not to compete protects employers from their employees leaving and using confidential information to compete against them.

This is a very brief introduction to covenants not to compete. If you need assistance with drafting a covenant not to compete or negotiating the terms of one, please contact me for further information.

Although an employer can not prohibit employees from filing lawsuits, there are several ways in which an employer can lessen its chances of defending against a sexual harassment claim.  One of the easiest ways that an employer can protect itself is by taking measures to prevent and immediately eradicate all harassing conduct.

A sexual harassment policy is a good place to start.  An effective sexual harassment plan must clearly and concisely explain the prohibited conduct, and contain language that is easily understandable by all employees.  The employer must ensure that all employees receive the sexual harassment policy, and have easy access to it at all times.  Also, the company or organization should define sexual harassment, and list the parties that are covered under it.  Next, the employer should provide examples of the conduct that constitute unlawful behavior.

The employer should inform employees that they are free to file grievances, and then it should thoroughly explain the complaint process.  Also, the owners or managers should provide the names of the people who can receive the complaints, and assure employees that their grievances will be taken seriously and promptly investigated.  Next, it is important to explain the consequences for engaging in the unlawful conduct, and detail that the complainants, witnesses and other people with relevant information will be protected from retaliation.  Also, the employer should obtain a signed form from employees indicating that they received and understood the policy.  Last, even though the employer has a sexual harassment procedure, it is more important that it consistently adheres to it.

Although lawsuits are unavoidable, employers can defend themselves against sexual harassment claims by showing that they tried to prevent and promptly eradicate offensive conduct by implementing a sexual harassment policy, and steadfastly following it.

Why not? Everyone has worked for someone at some point. I worked for employers, and from time to time I wondered, “Was that legal?” Also, I’ve been a manager, and I wondered, “Can I do that, is that legal?” Employment laws provide protections for workers and guidelines for employers.