For many businesses, intellectual property is among the most valuable of its assets. A common way to protect that IP is through a non-disclosure agreement with your employees (among other potential parties). When it comes to employees though, when and how should that NDA be delivered? NDAs can be included in the employee handbook of course, or can be issued as a stand-alone document.
The Case for Including an NDA in the Employee Handbook
One Stop Shopping
Including the NDA in the employee handbook ensures that employees are aware of all policies in one place. The handbook typically outlines expectations, rights, and obligations regarding behavior, conduct, ethics, and company resources. The NDA can be seen as part of this broader framework, giving employees a single document where they can find all the rules governing their employment. By including the NDA alongside other policies like harassment, benefits, and leave, employees can see that confidentiality is equally important to other aspects of their employment.
Ease of Distribution
Handbooks are typically given to employees at the beginning of their employment, and many businesses require employees to sign an acknowledgment of receipt. This process provides a way to ensure that employees are aware of the confidentiality requirements without needing to deal with an additional separate document either then or later on. Having the NDA in the handbook streamlines this process and can reduce administrative burdens by avoiding the need to distribute and track multiple documents.
Consistency
When an NDA is included as part of the employee handbook, it applies uniformly across all employees, which can simplify management for HR teams. There’s no ambiguity about whether employees have signed an NDA—everyone who has received and acknowledged the employee handbook has agreed to the confidentiality terms. This approach helps reinforce consistency in how confidentiality is handled across your company.
The Case for a Standalone NDA
Clarity and Emphasis
An NDA is a legally binding agreement, and confidentiality is often a critical concern for many companies. This is true particularly for industries that deal with sensitive information, such as technology, healthcare, finance, or law. By having a standalone document, you can provide greater clarity about the specific terms of confidentiality and non-disclosure, which could otherwise be buried in a general handbook. The standalone document allows you to highlight the importance of the agreement and to focus on specific legal obligations that may not be adequately addressed in a general policy manual. A stand-alone document also helps ensure that employees will be aware of the policy and its importance. This emphasis and clarity may also help aid in enforcement.
Tailored Terms
NDAs often contain highly specific terms related to the nature of the information being protected, the duration of the confidentiality obligations, and the consequences of violations. These details may sometimes be too complex to be incorporated into a general employee handbook. A standalone NDA allows you to tailor the document to suit the specific needs of the business, the employee’s role, and the type of information they will have access to. A one-size-fits-all approach in the employee handbook may fail to address the unique aspects of confidentiality relevant to different departments or positions. As with the above section, this degree of tailoring can not only better protect your interests, but may also aid in enforcement (i) by making it clear the employee knew the exact terms to which they were agreeing, and (ii) ensuring that the document is not overly broad and does not include illegal provisions.
Ease of Updates
A separate document makes it easier to update specific terms related to confidentiality without having to revise the entire employee handbook. This flexibility is particularly useful in industries where confidentiality standards change frequently, or as your business grows and new types of sensitive information emerge. By keeping the NDA separate, you can make changes to the document when needed without requiring a full overhaul of the handbook.
The Best of Both Worlds?
For some companies, the best solution may be a combination of both approaches. Businesses can include a general policy in the employee handbook to provide employees with an understanding of confidentiality expectations. This policy can also include a stipulation as to which employees or categories of employees will be expected to execute a separate NDA. This way, you ensure employees are aware of their responsibilities upfront while still maintaining the clarity and enforceability of a standalone agreement.
Conclusion and Other Considerations
Whether to include an NDA in an employee handbook or have it as a standalone document depends on the nature of your business and the level of confidentiality required. Including the NDA in the handbook can be convenient and ensures uniformity across the organization, while a standalone NDA allows for more clarity, specific tailoring, and potentially greater legal enforceability. In many cases, a hybrid approach may be the most effective, ensuring both awareness and clarity without compromising the legal integrity of the agreement. If using a stand-alone document, be careful to ensure that its execution is a requirement of employment. NDAs executed later may require additional consideration (i.e. some new compensation or benefit to the employee) to be enforceable. This is true also of adding NDA provisions to an existing handbook after hire. There is no right answer as to whether it is best to present an NDA in your handbook or asa standalone document (or both!). That is a nuanced decision based on your goals, your business, the timing of presentation and the type of information in question. If you have questions about how best to protect your confidential information, the team at Way Law is here to help!