What is an Intern Non-Disclosure Agreement?
An intern non-disclosure agreement ("NDA") is a legally-binding contract between a company and its intern(s) that protects the company’s business information and any confidential information from being disclosed by the intern to unauthorized third-parties. An intern NDA will clearly state what is considered "confidential information" for that particular company (or, it may provide a standard list of information that is generally considered confidential). This is crucially important, because how a particular company defines "confidential information" within the NDA must be closely adhered to, otherwise a company may be out of luck and find itself unable to enforce the non-disclosure obligation .
Most companies require their interns to sign a non-disclosure agreement so that the company can protect its business information and trade secrets from being disclosed to competitors of the company or to anyone else. These agreements prevent interns from sharing confidential information about the company or about what they work on with third-parties who do not have a right to know it. Thus, if an intern were to suddenly appear on a competitor’s website bragging about his or her time at your company and how he or she worked on a specific product, your company would be able to enforce the NDA to have the intern take the post down or otherwise prevent any additional disclosure. Intern NDAs also help to enforce confidentiality obligations in other employment contracts they may already have with the company (if some is given), including with respect to inventions, confidential information and similar obligations.
Essential Components of an Intern NDA
The terms of an intern NDA vary slightly potentially based on the level of confidentiality surrounding the information that will be shared with the intern. The NDA generally consists of the following components: (1) the definition of confidential information, (2) mutual agreement not to share or otherwise disclose such information to third parties, (3) an acknowledgement by the intern that he/she will not use or attempt to use any confidential information for commercial purposes and (4) obligations on the part of the intern with respect to returning confidential information to the company at the end of his or her internship.
While the scope of this type of NDA should exclude data or information that is already publicly available or otherwise accessible to the public, an NDA with a narrowly defined scope may be beneficial to ensure no information that an intern has access to is disclosed. If the NDA is unnecessarily overly broad, however, the signing of it by the interns may not be binding or enforceable.
Intern NDAs: The Pros and Cons for Companies and Interns
Intern non-disclosure agreements can be beneficial for both companies and interns in a lot of ways. For example, they protect specific trade secrets from being spread to competitors and unauthorized employees or other parties. They also protect both parties from inadvertently compromising the terms of their agreement by revealing that either of them had inside knowledge about the business. This affects company profitability and the trust of investors. Finally, NDAs promote job security for both the intern and the company by creating inter-department trust. Without trust or legal agreements in place, workers can become paranoid that something they say will exacerbate long-term impacts on a contract or deal.
Substantial Legal Aspects of Intern NDAs
Courts generally enforce non-disclosure agreements (NDAs) if they clearly articulate what is protected, to whom, for how long, and for what geographic areas. While some consultants look at intern NDAs from just these terms, companies also need to review their agreements under the "at-will" states’ policies on non-compete and trade secret protection. In addition, it can be helpful to check the state’s anti-NDA statutes, which can limit the scope of the anti-NDA.
For example, California has not only ruled that the Federal Defend Trade Secrets Act "does not trump state law" (Pineda v. Kid’s Club), but it requires employees "to demonstrate they used confidential information in the competitive market to hold a new employer liable for misappropriation of trade secrets" (see Downtown LA Motors, LP v. BMW). Because NDAs are contracts with the employees, the company should follow California law when drafting the NDA for a California-based intern.
Companies also need to give interns industrial training. Without the regulated training, the employer cannot prove the intern conferred a benefit on the employer to support the agreement. This is true for federally funded programs, which must provide skill-specific training as a condition for federal funding.
If a company hires interns through a staffing agency, both the company and the staffing agency must agree on indemnity and liability. Employees can have difficulty gaining access to the company’s trade secrets if the staffing agency does not provide necessary training to the contracted intern. To understand the risks , the company must work with the employment arm of the staffing agency, not the marketing arm.
Importantly, intern NDAs are now available as templates. There are many online agreements that can be downloaded off the internet. However, the company needs to use an internship handbook if it is relying on any of these escrow/NDAs.
While generic, quick-fix NDAs will work within certain limits — and, with close, accurate drafting, they can be turned into effective agreements — they are not without risk. If the agreement can be proved to be unfair to the intern, the agreement may be challenged in court. Some online documents will require the NDA to be struck down in its entirety, while others offer "amendment" or "remedy" clauses to delete the unfair terms.
Tom Spiggle has observed how courts have been moving in the direction of striking agreements in their entirety when there is "a single overbroad provision that is critical to the contract as a whole." This trend has been seen in cases like Thermal Design v. Amerapex Corp., where the court voided an entire NDA that covered every conceivable aspect of the employer’s business. His observation is helpful if you want to know what the company must do to draft a valid agreement. The company should overlay each piece of information it put into the NDA against the justifications for requiring confidentiality. If its contents can be justified, the term can remain. If not, the term should be omitted.
Implementing Intern NDAs Effectively
An intern non-disclosure agreement will vary from company to company but should always be transparent. Some interns may have existing obligations to current or former employers from past non-load agreements. Interns should be brought into the fold when it comes to learning about sensitive information (it’s part of the NDA) and should be treated as any other employee. Just because an intern leaves does not mean that they stop being a part of your company.
Your company should establish its NDAs for interns by first preparing and timing appropriate intern education and training. Interns should be trained in company policies before they begin working. Put together a timeline for when interns can be efficiently trained so that they have no access to company secrets or sensitive information until they’ve been educated. Interns should not be left to figure out this information on their own and they shouldn’t have to wait two weeks or longer after hypothetically starting to learn what they’re supposed to do with company information. Interns need to know their responsibilities as soon as they start.
Intern job descriptions should be more than just a title; they should also provide important information about the position. Interns should know that if they have access to company secrets, then they are required to sign an opt-in confidentiality agreement, just like regular employees. They should be informed that if they don’t sign, they will not be eligible for employment or offered an internship. Companies should create specific NDAs for all internships, regardless of whether there is any sensitive information to protect. Even if there is no confidential information involved, companies should still create NDAs so that all interns are given the same agreement. Interns should know that once they are offered an internship or employment, the opt-in agreement will be requested and that if they don’t sign it for any reason, they will likely be rejected for the position.
Generally speaking, intern NDAs should be consistent with NDAs used for all new employees. If a company does not require every new employee to sign an NDA, then intern NDAs should have the same opt-in agreement or no NDA at all. For companies who do require NDAs from all new employees, intern NDAs should be standardized. The agreement should comply with state and local laws. They should be written in plain language to ensure that interns understand the terms, particularly if the intern is not of legal age (i.e., under 18 years of age). The NDA should also have a clear and precise definition of confidential information.
Interns should be provided with a copy of their signed NDA. This will allow them to review the obligations required of them, and their rights to the extent they have any. Interns should understand that some sensitive information is only shared with employees at a particular level, and that sharing of such information should be kept within those levels. Employers should also make it clear to interns about how they can safely store and dispose of any confidential information.
Interns should be reminded periodically about their responsibilities to protect confidential information. Interns should be responsible for notifying the company if they believe that they are in possession of confidential information that was inadvertently disclosed. If an employer discovers that an intern (or any employee) disclosed confidential information, steps should be taken to evaluate the impact and what can be done to minimize any damage.
If an intern has access to sensitive information and has worked in the company for a certain number of years, or completed several internships, then it may be safer to ask them to execute a more formal and comprehensive NDA at some point. It’s also important for companies to remind former interns of their obligations to protect confidential information. For example, a company may need to recall a former intern to consult on an issue that requires knowledge of the confidential information about which they were previously informed.
Mistakes When Dealing with Intern NDAs
Typical errors companies make when considering intern NDAs, and how to avoid them:
Not thinking about the purpose of the NDA. Most companies use NDAs to prevent the disclosure of confidential or proprietary information. However, companies sometimes ask interns to sign NDAs regarding information that is just not highly sensitive, and even though it would be important for the company, the law does not allow companies to stop employees or interns from commenting on it. Examples include information about workplace policies and procedures or about working conditions—that is, the basic stuff that most companies are required by law to have available to current employees, and that many are also required to post in the workplace or make available to applicants.
Thinking that the NDA is going to give the Company the ability to sue the intern or to block another employer from hiring the intern. NDA’s do not give employers any enforceable rights by which they can force an intern to keep mum. They may provide evidence that a particular intern might otherwise have said something that harmed the company. Also , there is no way to prevent someone from getting hired or going to work for a competitor—and particularly if the intern is not an exempt employee. This is because the law does not allow noncompete or other restrictions against competition for employees who make less than the statutory salary level (which is currently $684 per week or $35,568 per year) or who work in occupations or in positions industry recognized as requiring the skills and experience required to perform that work.
Failing to consider that interns are different than other employees. Employers often enlist interns to do work that is more administrative in nature, for which they do not require interns to have confidential information at all. In that case, a policy that protects confidential information about those tasks and procedures is probably a better fit, since intern activities are not secret and the company may not have invested significant costs or other resources into that work.
Assuming the NDA will remain enforceable forever. Employers also need to be aware that NDAs must be renewed and kept updated, or they risk their prior versions being challenged and perhaps a company has to convince a court that the NDA continues to serve a legitimate business purpose. NDAs should only cover current confidential information—otherwise they risk becoming general secrecy agreements that will be unenforceable.