Employers generally include various protective clauses in their contracts with new workers and those moving into different positions within their organization. Restrictive covenants are among the most valuable contract inclusions for employers trying to limit a company’s exposure and the possibility of an employee harming the organization after leaving their position.
Employers in California are subject to more limitations on the use of restrictive covenants than businesses in most other states. For example, while noncompete agreements are generally lawful contract inclusions in most jurisdictions, they are not enforceable when integrated into standard employment contracts in California.
Nondisclosure or confidentiality agreements are another type of restrictive covenant that employers sometimes use. They hope to protect the company’s reputation or trade secrets by limiting what workers can reveal to competitors or the public. Business leaders may have heard that there have been rules adopted regarding confidentiality, nondisclosure or non-disparagement agreements. Are these contract inclusions still enforceable in California?
Restrictions only apply in certain circumstances
Typically, the main purpose of a nondisclosure or non-disparagement clause is to prevent workers from harming a company’s reputation by talking negatively about the business or its leaders. Non-disclosure or confidentiality agreements can serve a broader purpose by protecting trade secrets and preventing workers from revealing non-public information to competitors or journalists. They usually also have to avoid sharing information on social media.
While it is true that California has adopted limitations on these contract inclusions, those restrictions are not as broad as the rules that govern noncompete agreements. Companies can no longer enforce clauses intended to prevent workers from discussing violations of their rights or illegal activities.
For example, non-disparagement clauses do not prevent workers from speaking up about sexual harassment or safety violations. Companies cannot enforce these clauses if the worker discloses misconduct that they endured, illegal activity and other legitimate concerns. However, employers can enforce nondisclosure or confidentiality agreements in scenarios where workers reveal private information about company operations.
Employers weighing the pros and cons of contract litigation may need to discuss this matter at length with someone familiar with California’s employment and contract laws. Reviewing the situation with a skilled legal team can help clarify whether enforcing a non-disclosure agreement is a viable option given the circumstances.
