Usually, an employee while performing his duties with the company comes across trade secrets and confidential information. To prevent the passing off of such confidential information and trade secrets, an agreement is entered by an employer with his employee commonly known as Non-Disclosure Agreement (NDA) or Confidentiality Agreement. It is a legal contract between employer and employee by which employee agrees not to disclose information outlined by the agreement.
To further the purpose of NDA, the employer enters into a non-compete agreement too with the employee. A non-compete or a non-competition agreement restrain the employees from participating in the same trade as the employer for a period of time, after the termination of employment.
Advantages of employee non-disclosure and non-compete agreement
- The obligation under the agreement: The main aim of an employee confidentiality agreement is not only to restrict them from disseminating confidential information but also to not use such information against the will of the employer. It is mandatory for the employee to take reasonable steps in order to protect the confidential information.
- Remedies available: In case of breach of confidentiality, unless provided in the exception clause, the employee will face the legal ramifications. The employer can seek compensation for his loss under The Indian Contract Act or initiate proceedings under The Indian Penal Code. The remedies available are equitable remedy like an injunction and liquidated damages through which the affected party shall get compensated for his loss.
- Trade secrets: The employee confidentiality agreement restrains the employee from disseminating information that is confidential in nature. The definition of confidential information includes trade or commercial secrets, specific confidential information pertaining to the organisation, technical know-how of the business related to the employer. Thus, through an employee confidentiality agreement, the employer can inherently protect his business interests.
- Business interests: A non-compete agreement helps the employer protect his legitimate business interests. Non-compete agreement though invalid post-termination of employment, still promulgates to protect the interests of the employer during the period of employment. This prevents the employee from using the goodwill of the organization to compete with his employer. Employee confidentiality and non-compete contract also prevents the employee from sharing confidential information pertaining to the business.