As a veterinary professional, you likely were presented with a document referred to as an NDA, or you discussed the need for one at some point in your career. However, not all NDAs are equal. If we dust off our copy of Black’s Law Dictionary, we see an NDA, or nondisclosure agreement, defined as “a legal contract in which one or more parties agree to keep information, as a trade secret, confidential and protected for a specific amount of time.” Such agreements are valuable and appropriate in the context of a veterinary practice in these three scenarios.
1. Onboarding New Employees
Your client list and referral sources are the lifeblood of your business, whether you are a new practitioner or have operated your veterinary hospital for 20 years. You want to protect all contact information. Therefore, I recommend that practice leaders require all new employees, including front-desk personnel, back-office staff, veterinary assistants, veterinary technicians and associate veterinarians, to sign a nondisclosure agreement. The document forbids employees from disclosing the identity and contact information of the hospital’s clients and referral sources to any third party.
While many veterinary practices have (or should have) confidentiality policies in their employee handbook, the only recourse in the event of a policy breach is termination. Even if a new or long-time employee executes a handbook acknowledgment form (an excellent procedure to follow), the handbook alone doesn’t create a binding contract governing the protection of important information. Instead, a veterinary practice seeking a binding agreement with enforceable penalties should have employees execute a nondisclosure agreement.
A binding and enforceable NDA that forbids employees from disclosing confidential information must contain the following elements:
- An unambiguous description of confidential information. For example, “The employee agrees and acknowledges that during the course of the employee’s employment with the practice, the employee shall have access to the practice’s confidential information. For purposes of this agreement, confidential information shall be defined as and include the identities and contact information for any of the practice’s clients and referral sources.” The clause should define clients and referral sources so employees cannot argue ignorance.
- A plain-language description of the obligations. For example, “The employee shall not use for the employee’s purpose or benefit, or for the benefit of any third party, nor shall the employee disclose to any third party, the identities and contact information for any of the practice’s confidential information.”
- Length of the nondisclosure period. In most states, an NDA protecting an employer’s client information can be enforceable in perpetuity.
- Consequences of a breach. An NDA without penalties isn’t practical. However, in most states, the penalties are enforceable if they’re designed to make the practice whole instead of just punishing the employee. The NDA can include language stating that the employee is responsible for the hospital’s legal fees and costs in enforcing the nondisclosure agreement.
- Exclusions. An NDA must not forbid an employee from disclosing information that the person has a legal right or obligation to reveal. A thorough and detailed definition of confidential information generally addresses such an issue, but I recommend including a disclaimer to inform employees of their freedom to discuss and disclose information as covered in the National Labor Relations Act, any information which the employee has to report to a government entity or law enforcement agency, and anything requested in a lawfully issued subpoena.
If employees try to use confidential information for their benefit or a competitor’s benefit, a nondisclosure agreement containing the above provisions will enable the practice owner to recover monetary damages.
2. Selling or Buying a Practice or Equity Stake
After the execution of a letter of intent but before the transaction’s closing, the practice buyer and seller engage in a due-diligence period. The pause allows the prospective buyer to review and investigate the target entity’s financial, operational and legal information. During due diligence, the buyer seeks access to the seller’s tax and bank data, revenue and overhead information, employment agreements and records, and legal documents.
Since not every transaction culminates in a sale, a seller often requires a potential buyer to execute a one-way nondisclosure agreement. The document forbids the potential buyer from using or disclosing any information learned during due diligence if the deal does not close.
To protect the seller and buyer, the one-way agreement should articulate the shared records and define confidential materials. The wording is critical because some information might be in the public domain and, therefore, not confidential.
The one-way NDA also should include the format in which the information shall be provided, how long the buyer can access it, and a requirement that the buyer certify the return or destruction of documents and data if the deal isn’t consummated.
3. Terminating an Employee
Unfortunately, some employment relationships end because of misconduct or poor performance. I advise practice owners to offer a separation agreement that pays for the release and waiver of employee claims. Including a nondisclosure clause in a separation agreement is good practice and a means to provide for confidentiality protections if the employee never executed an NDA.
However, a practice owner needs to be aware of compliance requirements. Many states prohibit employers from preventing workers from disclosing allegations of sexual harassment, assault and discrimination. A practice owner should consult with an attorney to ensure that any confidentiality outlined in a separation agreement does not violate local or state laws.
WHAT DID YOU SAY?
Whether you are an associate veterinarian or the owner of a single-doctor practice, or you work for a large or small veterinary group, you likely spent years developing your reputation within the profession and public. However, in this social media age, the hard work you invested in establishing your personal and professional reputation can be undone by one viral post, message or tweet. Therefore, I recommend incorporating a nondisparagement agreement or clause into your practice’s nondisclosure agreement.
Black’s Law Dictionary tells us that a nondisparagement clause is “an agreement that prohibits the parties from making any public or private negative statements, remarks or representations about each other.” A practice owner who includes such a clause in an employee agreement can obtain a court order compelling the likely former worker to remove or delete the offending post.
Despite what recent headlines state, nondisparagement clauses are enforceable. However, their scope has narrowed over the past two years. The key to drafting an enforceable nondisparagement clause is defining what current and former employees may not say.
For example, your agreement might read: “The employee agrees to refrain from making any public or private statements that would negatively harm the employer’s reputation as a provider of veterinary medicine or in any way disparages the employer’s clients and/or referral sources. This clause does not prohibit the employee from disclosing any terms or conditions of the employee’s employment with the employer, nor does it prohibit the employee from discussing issues related to workplace safety or discrimination.”
Even with the exclusionary language, the clause would forbid a disgruntled current or former employee from posting about the quality of care provided by your practice, the person’s interaction with clients and the details of specific animal treatments. The practice could obtain a court order compelling the post’s removal if a breach occurs.