If you run a business in New York, you have probably heard of non-disclosure agreements. You may have been asked to sign one, or maybe you have been wondering whether you should be using them yourself. Either way, understanding how these agreements actually work is more useful than most people realize.
This article breaks down what a non-disclosure agreement is, when it makes sense to use one, what needs to be in it, and what makes it hold up if something goes wrong.
Key Takeaways
- A non-disclosure agreement is a legal contract that restricts one or both parties from sharing certain information with others
- Signing an NDA does not physically prevent someone from leaking information. It gives you legal recourse if they do
- There are two main types: one-way NDAs, where only one party is bound, and mutual NDAs, where both parties are
- Vague language, wrong duration, and missing required provisions are the most common reasons NDAs fail in court
- New York’s changing laws around non-competes make a well-drafted NDA more important than ever for protecting your business
Have questions about whether your business needs a non-disclosure agreement in New York? Call Fisher Stone at 212-256-1877 to speak with an attorney today.
One-Way vs. Mutual NDAs: Which One Do You Need?
Not all NDAs work the same way. The most important structural question is whether the agreement runs in one direction or both.
| Type | How It Works | Common Uses |
| One-Way (Unilateral) | Only one party is sharing sensitive information and the other party is bound to keep it confidential | Hiring employees, bringing on contractors, vendor briefings, pitching to partners |
| Mutual (Bilateral) | Both parties are sharing sensitive information and both are bound by the same confidentiality obligations | Joint ventures, business negotiations, mergers, partnership discussions |
The right choice depends on the situation. If you are the only one sharing anything sensitive, a one-way agreement is typically all you need. If both sides are going to be opening their books or exchanging proprietary information, a mutual NDA protects both parties equally.
When You Need an NDA and What It Should Cover
Common Situations Where an NDA Makes Sense
NDAs come up more often than most people expect. You may want to consider using one when:
- Hiring employees who will have access to client lists, pricing, trade secrets, or internal processes
- Bringing on a contractor or freelancer who will work with proprietary information or systems
- Working with vendors or third-party service providers who will learn details about your operations
- Exploring a potential business deal, merger, acquisition, or investment
- Pitching a business idea or sharing a product concept with an outside party
- Discussing a potential partnership where sensitive financial or strategic information will be exchanged
What a Solid NDA Should Include
The specific terms matter as much as having the agreement in the first place. A well-drafted NDA should clearly address:
- What information is protected. The agreement needs to define exactly what counts as confidential. Vague language like “all information discussed” often fails in court. Specific categories, such as client lists, pricing models, financial projections, or technical processes, are far stronger.
- What is not protected. Information that is already publicly available, that the receiving party already knew, or that they independently develop on their own is generally excluded from coverage.
- How long the agreement lasts. Most NDAs have a set timeframe, often one to five years for general business information. Trade secrets, which are a specific legal category of information with lasting commercial value, can and often should be protected indefinitely.
- What the receiving party can and cannot do. The agreement should spell out that confidential information can only be used for the specific purpose of your relationship, not repurposed for the receiving party’s own benefit.
- Who is covered. If the receiving party is a company, the agreement needs to address whether their employees and advisors are also bound.
Why Some NDAs Do Not Hold Up in Court
Having a signed NDA is not the same as being protected. Many agreements fail when they are actually tested, and the reasons are almost always avoidable.
| Common Problem | Why It Matters |
| Definitions that are too vague or too broad | Courts routinely throw out NDAs that try to cover everything without specifying what actually needs protecting |
| Duration that does not match the information | Applying a short time limit to trade secrets can inadvertently strip them of legal protection |
| No carve-out for whistleblower activity | Federal and New York law require that NDAs not prevent people from reporting illegal conduct to regulators. Missing this language can invalidate the entire agreement |
| Signed by the wrong person | An NDA signed by someone without authority to bind the company may not be enforceable |
| Template language that does not fit your situation | Generic agreements may miss protections that matter for your specific industry or relationship |
The biggest takeaway here is that specificity is what makes an NDA enforceable. The more precisely the agreement defines what is protected, why it is protected, and for how long, the better it will hold up if it is ever challenged.
What New York Business Owners Should Know About NDAs Right Now
NDAs Are Becoming More Important as Non-Competes Face Restrictions
New York has been moving toward significant restrictions on non-compete agreements, which are contracts that prevent employees from working for competitors after leaving a job. If those restrictions take full effect, many businesses that previously relied on non-competes to protect their competitive position will need to rely on NDAs instead.
This is a meaningful shift. A non-compete can stop a former employee from working for a rival. An NDA cannot do that. What it can do is prevent that person from taking your client lists, pricing strategies, or trade secrets with them. For New York businesses, making sure your NDAs are tight and current is not just good practice right now. It is increasingly the primary line of defense.
Workplace Settlement NDAs Have New Rules in New York
New York also updated its rules around NDAs used in workplace discrimination and harassment settlements. Under New York General Obligations Law Section 5-336, employers are now limited in how they can use confidentiality agreements when resolving these types of claims.
In plain terms: employers can no longer include penalty clauses that punish employees financially for violating a settlement NDA in these situations. The law has also adjusted the timeline for how these agreements are signed.Â
If your business uses NDAs as part of any settlement process, those agreements need to reflect current New York requirements or they may not be enforceable.
How Fisher Stone Can Help
Fisher Stone works with New York businesses on contracts, business agreements, and the legal foundations that protect what they have built. Whether you need an NDA drafted from scratch, want an existing agreement reviewed, or are navigating a transaction where confidentiality matters, our team can help you get it right.Â
Contact our attorneys or call 212-256-1877 to discuss your situation and find out how we can help protect your business.
What is the difference between an NDA and a non-compete agreement?
These are two different contracts that do two different things. A non-disclosure agreement restricts someone from sharing or using specific confidential information. A non-compete agreement restricts someone from working for a competitor or starting a competing business. In New York, non-competes are facing significant legal restrictions, which makes having a strong NDA even more important for protecting your business information.
Does a free NDA template hold up in court in New York?
It depends on what is in it. Generic templates are often drafted to be broadly applicable, which means they frequently include language that is too vague to enforce or miss provisions required under New York law. Courts routinely strike down NDAs with overbroad definitions or missing carve-outs. A template can be a starting point, but it should be reviewed and tailored by an attorney before you rely on it.
Can an NDA last forever?
For most types of business information, courts expect a reasonable time limit, typically between one and five years. However, trade secrets are treated differently. Because trade secrets have lasting commercial value, the confidentiality obligation for that category of information can continue indefinitely as long as the information remains secret. A well-drafted NDA handles these two categories separately rather than applying a single time limit to everything.
What happens if someone violates an NDA in New York?
If someone breaches a non-disclosure agreement, you may be able to pursue legal remedies including financial damages and a court order requiring them to stop the disclosure. That said, enforcing an NDA can be difficult and expensive. You generally need to show that a breach occurred, that the information was genuinely confidential, and that you suffered actual harm as a result. This is another reason why having a carefully drafted agreement from the start makes a real difference.
