California has numerous unique statutes that protect employees. Business leaders need to understand the special provisions included in state law to ensure their compliance.
They also need to be aware of how employment practices in California differ from those across the country to ensure that their practices and contracts actually protect the business. Companies that successfully operate in other states may have to adjust their employment practices and contracts to comply with California statutes.
The use of nondisclosure agreements, sometimes called confidentiality agreements or non-disparagement clauses, has long been a common employment practice. California has adopted rules that restrict their use. Are confidentiality clauses still worth including in California contracts?
Some nondisclosure clauses are still enforceable
Confidentiality, nondisparagement or nondisclosure agreements can still lead to enforcement actions in California civil court. They do not automatically invalidate a contract and can be the basis for litigation when an outside party releases non-public information.
Companies sometimes include these agreements in initial employment contracts. They may also negotiate confidentiality agreements with workers exiting the organization. Regardless of when they sign the agreement, enforcing it is possible in most circumstances. Current restrictions only apply in scenarios where companies try to prevent workers from discussing company misconduct or mistreatment that they experience on the job.
In cases where the goal is to prevent the disclosure of non-public information and trade secrets, nondisclosure agreements are still theoretically valid and enforceable. Adding appropriate terms to employment contracts and even agreements with vendors or service providers can help companies retain their competitive advantages.
While the government limits the enforceability of certain confidentiality terms, others are still valid contract inclusions in California. Business leaders who regularly review and update their contracts with the assistance of a skilled legal team can optimize organizational protection and better ensure the validity of the contracts they sign.