Is A Non-Disclosure Agreement And A Non-Compete Agreement The Same?

Non-compete agreements and non-disclosure agreements are two agreements that a handful of businesses will have to deal with. The purpose of both agreements is to protect proprietary rights owned by businesses.

These two agreements are also quite different, and it is important for all business owners to know the difference between them.

What Is A Non-Disclosure Agreement?

Companies working on a project that involves some proprietary information are the ones that make the most use of non-disclosure agreements. When an employee or contractor signs a non-disclosure agreement, he/she/it pledges not to reveal details of the project to a third party. This is to prevent the proprietary information from falling into the wrong hands (competitors).

A good non-disclosure agreement will also have provisions for what will happen if an employee breaches the non-disclosure agreement.

What Is A Non-Compete Agreement?

A non-compete agreement is one where an employer makes an employee sign an agreement not to work for another business within the same industry for a period after leaving the company. The reason for this is to prevent the former employee from using his knowledge and contacts for the benefit of its competitors.

How Are They Similar?

Non-disclosure agreements are similar to non-compete agreements because both of them involve protecting company information. With a non-disclosure agreement, the intention is to prevent the direct transfer of proprietary information related to a particular project.

For a non-compete agreement, the intention is to prevent the transfer of proprietary information and connections gained over the years while working for the business.

For instance, a non-compete can prevent a salesperson from working with a competitor after two years of leaving. Within two years, the company expects that the salesperson might have lost his or her knowledge of sensitive details at the company, and his or her connections will not be as strong.

The Attitude Of The Courts To Non-Compete Agreements

Non-compete agreements are made between a company and an employee. The nature of this relationship is asymmetrical because companies usually have more bargaining power when making negotiations. A worker who has no job will prefer to sign a non-compete agreement rather than go back home jobless.

Non-competes also control a workers’ prospects even after leaving the place of employment.

For these reasons, the courts are not well predisposed to non-competes and will not enforce them in a lot of instances.

If you want to use a non-compete, you have to prove to the court that it is necessary in your own situation. Also, a lot of the success of a non-compete agreement depends on its wording and construction. Which is why you need the services of a good attorney to help you construct non-compete agreements that will be acceptable by the courts.

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Knowing that you need quality non-compete agreements is the first part of the battle. Finding lawyers good enough to give you quality non-compete agreements is another part.