NDA – Non-Disclosure Agreement Law in PA

Non-Disclosure Agreements and Confidentiality Clauses in PA

One common question for a Pittsburgh lawyer is: are non-disclosure agreements enforceable? 

Let's talk about employment-related NDAs, first. 

Employment Related NDAs

So why would your employer ask you to sign an NDA? 

Some information is truly private such that an employer would legitimately want to keep it that way. For example, a home-owner/employer would be well advised to have his cleaning person or nanny sign an NDA to keep his dirty laundry -- in the most literal sense -- private.

That's the "innocent" NDA. 

 

Nefarious Use of Employment-related NDAs

The not-so-innocent use of an employment NDA (still talking about just the employment context) involves an attempt to side-step trade secret law, by trying to limit the employee from disclosing anything learned from the employer, even if the information fails to constitute a true trade secret as defined in Pennsylvania.  A true "trade secret," according to the Uniform Trade Secrets Act adopted in Pennsylvania, is information that the employer actually spent money acquiring and developing and took steps to keep it secret, such as a customer list. Very little information meets this high standard.  Click here for more.   

Another shady use of an employer NDA involves a thinly disguised non-compete agreement, when non-competes are highly disfavored and about to be banned entirely by Congress and/or Federal Trade Commission (FTC).  That said, neither Congress nor the FTC is seeking to prevent the enforcement of NDAs.  This is curious, because an NDA effectively bans the employee from sharing with a prospective employer any "confidential information."  This limits the employees future employment options.  

 

Limits to Employment-Related Non-Disclosure Agreements 

For the above reasons, the law imposes strict limits on the enforcement of employment-related non-disclosure agreements. NDAs between an employer and employee must be: 

• • Reasonably necessary to protect the employer's interests, i.e., not over broad and unduly burdensome to the employee, similar to a non compete. 
  • Pertain to information that is not commonly known or publicly available on the internet. 
  • Involve something that's not illegal or against public policy. This includes a prohibition against while-blowing careless food handling practices by the employer. 
  • Involve an actual employee. Former President Donald J. Trump learned this the hard way, when he asked his administration's staffers to sign non-disclosure agreements.  There, an arbitrator refused to enforce then President Trump's NDAs, because the signatories were employees of the government, not Donald Trump. 

 

Contractual Defenses to Employment-Related NDAs

Plus, an NDA is a contract.  Thus, like all contracts in PA, the usual contract defenses apply in the employment NDA context. For example, a court looks for something called "consideration" in every agreement.  This is a promise exchanged for something of value. For example, if you employer has already hired you and has not given you any extra money or a new title, a new NDA -- unrelated to you being hired or promoted -- would lack consideration. 

Also, no contract in PA may "punish" someone. The United States eliminated "debtor's prison" in 1833. In short, courts refuse to enforce "penalty" clauses. However, a stipulated damages clause is permissible. 

 

Stipulated or Liquidated Damages

If the parties are stipulating to the amount of likely actual damages for breach, where ascertaining actual damages is difficult or impossible. So, for example, in the disclosure of one's dirty laundry, the parties can agree that each disclosure is worth $1,000, if that would be the approximate cost to enforce the agreement and instruct the party receiving the protected information to keep it quiet.  

 

Non-Employment Related NDAs or "Confidentiality Clauses"

OK let's say we step aside from the employment world -- where employers are perceived to have more bargaining leverage than the employee -- and we look at ordinary contracts.  Can parties -- when neither of whom happen to work for the other -- enter in agreements to limited the disclosure of private information and includes costs to be paid for disclosure of "private" information? 

Yes! 

This happens all the time. Confidentiality clauses in contracts are close cousins of employment-related NDAs, but because of the relatively equal bargaining power (in appearance at least, since neither "works for" the other), the courts are much more likely to enforce such agreements. Our Pittsburgh litigation attorneys routinely enter into such agreements for our clients when settling a case. 

 

What Non-Employment or "confidentiality clause" NDA's Are Enforceable? 

Below are some of the common examples of enforceable confidentiality clauses seen by each Pittsburgh attorney in our firm:  

• • Motor Vehicle Accident Cases. Settlements of a motor vehicle accident case, involving people injured in vehicles (involving full tort or limited tort described elsewhere on this Blog) or pedestrian injuries, or bike injuries. Here, the insurance companies for the negligent driver (such as State Farm or Liberty Mutual) will want confidentiality of the terms of settlement.  Why? Plaintiff attorneys talk. They can know much State Farm paid for its last settlement, for example.  Every (good) lawyer wants to get his client at least as much money as insurance companies have paid other injured parties.  
  • Credit Card Debt Disputes.  Here, our Pittsburgh lawyers routinely defend claims for enforcement of alleged credit card debt. Like the vehicle liability insurance companies described above, credit card companies (Discover bank, Capital One, etc.) have literally thousands of cases pending in Pennsylvania at any given time.  Any case they settle on the "high" side is one they want kept secret. 
  • Home Improvement and Commercial Property Renovation.  Here, the builder or developer tends to be "local" and thus concerned about negative information -- or a bad review -- in the community where they work.  As such, when they settle with a home or business owner regarding new construction or renovation.  

But all this assumes information is not already widely available. Here, again, the information must be private and not publicly known, such as the terms and amount of settlement.  Moreover, here, as with employment-related NDAs, all the usual contractual defenses exist:  lack of consideration, voidable as against public policy, etc.