When two things are similar, yet distinctly different, choosing between the two can be difficult. Take non-compete and non-disclosure agreements, for example. It’s important to know the difference between the two to make sure your business is as protected as possible.
Legally Speaking
Non-compete and non-disclosure agreements are both contracts. The parties signing the agreements intend to protect something. Non-compete agreements may protect a company against unfair competition while non-disclosures protect a company’s confidential information.
These agreements are not mutually exclusive. In other words, a business owner may use a non-compete, a non-disclosure, or both. It just depends on the situation.
Employers Use Non-Compete and Non-Disclosure Agreements
A business owner may have employees sign a non-compete agreement, often on or before their first day at work. The employee, then, is prohibited from working for competitors or from starting their own business within an industry or geographic area.
Additionally, companies typically maintain information that should be kept confidential. For example, sales strategies, client lists, reports, new product details, and research results may be safeguarded from accidental or intentional disclosure. An employee who signs a non-disclosure agreement is agreeing not to share or misuse their employer’s confidential information.
An employee may sign both a non-disclosure agreement and a non-compete. Although the non-compete is probably most often used with employees, companies sometimes use non-disclosure agreements for other reasons.
Other Business Uses for Non-Compete and Non-Disclosure Agreements
The basic use of a non-disclosure is to prevent the inappropriate distribution of confidential information. Employees are not the only parties that may be asked to sign a non-disclosure.
Non-disclosures may also be used during negotiations, collaborations with other companies, and discussions with potential investors or lenders. There are two basic forms of non-disclosures:
- One Way agreements are used when only one party has provided confidential information.
- Two Way agreements are used when two parties exchange information.
For example, a company sharing confidential data while raising capital may require the other party or parties to sign a non-disclosure. However, companies involved in a merger negotiation may both be required to sign non-disclosures.
Talk to an Attorney About Your Non-Compete and Non-Disclosure Agreements
The attorneys at Miller Estate and Elder Law assist clients like you with their business concerns. a free consultation with an experienced Alabama attorney, contact us at 256-251-2137 or use our convenient Contact Form.
We have offices in Anniston and Birmingham and serve clients in Gadsden, Hoover, Talladega, Vestavia Hills, and surrounding areas.