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What Is the Difference Between a Non-Disclosure and Non-Compete Agreement?

April 5th, 2023
Non-Disclosure and Non-Compete Agreement

Non-disclosure (NDA) and non-compete agreements are contracts that individuals and businesses use to protect their interests. Both fall under the category of legal restrictive covenants. These tools have some things in common, but there are a few notable distinctions. Preventing information leaks is crucial to a company’s success, because with so much competition, having that edge can make a big difference.

How Do Non-Disclosure Agreements Work?

Also known as a confidentiality agreement, an NDA restricts an employee or independent contractor from sharing their employer’s sensitive information with others. Companies need to maintain confidentiality to protect their market positions, and if an employee does not sign an NDA, that person might use the information to start up a similar business or share the information with competitors.

How Do Non-Compete Agreements Work?

These agreements are also between employees and employers. A non-compete specifies that an employee will not work for a competitor for a designated amount of time after they stop working for the employer. Non-competes are more common for companies that have high-level employees with access to sensitive information or when there is steep competition for talent.

A non-compete might also restrict an employee from opening up a similar business that is too close to the company; another restriction might be a set timeframe.

Benefits of Non-Disclosure and Non-Compete Agreements

Here are some benefits of these agreements:

  • Clarify employee expectations: Employees who sign these agreements up front understand the importance of not sharing information, and this can influence their behaviors and even make them more loyal. They will also understand the ground rules and the potential for litigation if the agreements are broken.
  • Client confidence: Clients feel more secure when their personal and business information will not leave your company when employees move on. This is especially important when a sole employee is responsible for a major client.
  • Enhance company value: If you ever sell your company, its value will be better protected with signed, restrictive covenants.
  • Protect your training investment: Employee training can be a significant investment, but some workers quit not long after it is completed. These agreements protect those investments and can deter competitors from trying to swoop in.

Employees are generally comfortable with signing non-competes and NDAs, but others might refuse to do so. When that happens, it might be best to consider other candidates.

Philadelphia Non-Compete Agreement Lawyers at The Gold Law Firm P.C. Help Businesses Protect Their Interests

When sensitive personal or company information falls into the wrong hands, security and profitability can be compromised. To learn more, speak with our Philadelphia non-compete agreement lawyers at The Gold Law Firm P.C. Complete our online form or call us at 215-569-1999. Located in Philadelphia and Pennsauken, New Jersey, we serve clients throughout South Jersey and Southeastern Pennsylvania, including Wilkes-Barre, Scranton, Northeast Philadelphia, Bucks County, Chester County, Delaware County, Lehigh County, and Montgomery County.

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