BIZLEBOX™ Business & Legal In-a-box for Out-of-the-box Thinkers

4. Untangling Non-Compete and Non-Disclosure Agreements: Navigating Business Legalities in the Digital Age

• Tamsen Horton • Season 1 • Episode 4

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Have you ever stared at the wordy jargon of a non-compete clause or a non-disclosure agreement and wished you had a law degree? 

Your wish is our command - we untangle these legal knots for you, using plain language and memorable examples. 

  • The first step is understanding that these two are not twins, but cousins with distinct purposes. 
  • Non-competes are about keeping your employees from becoming your rivals. 
  • Meanwhile, NDAs keep your secrets, secret. We walk you through when to use each of these and why they can be crucial for your business. 


The digital age has brought more than just convenience; it's also introduced new layers of complexity in the form of AI and data sharing. We delve into the updated consequences and considerations for NDAs in these uncharted waters.

With AI changing the game, it's crucial to be precise and proactive about protecting your confidential information. From screening your collaborators to restricting data flow, we provide practical insights on maintaining your information security. Plus, we highlight the value of having legal experts on your side.

Finally, to help gauge your legal readiness, we have a quiz waiting for you at BIZLEBOX.com. Join us on this journey and equip yourself to avert future legal hiccups!

Thanks for listening. Take the BIZLEBOX™ QUIZ ➡️ How Legally Prepared Are You

This podcast may be considered attorney advertising and is provided for educational and informational purposes only. This is not legal advice specific to any situations.

Speaker 1:

In this episode, we are really going to unpack the difference between confidentiality or competition in legal agreements, legal contracts that surface all the time for online business owners, especially online service providers, as you are navigating the waters of non-competes and non-disclosures, so join me, I am going to unpack it, give you some really easy to never forget examples and hope you can navigate your own way through confidentiality or competition.

Speaker 2:

Welcome to the Bizzle Box podcast, the go-to source for out-of-the-box entrepreneurs. Here you found business and legal in a box, all neatly packaged, helpful, with entertaining stories and unforgettable metaphors from licensed attorney Tampson Horton to design and achieve a profitable and legally secure business that makes an impact and allows you to fully live on your terms. Can you ever have an attorney without a disclaimer? Nope, never going to happen. Here's one just for you. Bizzle Box provides high quality info on business and legal issues, but to get the best advice for your situation, find an attorney you know like and trust. Tampson is an attorney, but she's not your attorney. She is my mom. Now here's Tampson.

Speaker 1:

Today I want to really chat with you and dive in to two different concepts that are often times confused and make sense because their names do sound a little bit similar. So we are going to be talking about non-compete clauses and non-disclosure agreements and I hope by the end of this episode you will have a really clear picture in your mind, when you hear different facts and circumstances as you are running and operating your business, that your brain is like ding ding ding, that's a non-compete. Would it even apply in this situation? Or ding ding ding, this is non-disclosure. What do I need to be aware of? So, as we are getting into this, I'm going to give you two situations that showed up in my own world in the same week and is one of the reasons that I knew this needed to move up in priority in terms of getting it recorded for you.

Speaker 1:

So non-compete and non-disclosures they're very different. They cover very different areas. So in the first situation, I had a Bizzle Box member who was in discussions with a large national university here in the States that happened to be sponsored or affiliated with a billion-dollar corporation and, because of the arrangement between the corporation and the university, they had reached out to the Bizzle Box member and wanted to discuss purchasing a number of licenses for the online program for one-on-one coaching for ongoing membership. And this Bizzle Box member was smart enough to know that they likely needed a NDA, which is a common abbreviation for non-disclosure agreement, and so they posted the question inside Bizzle Box and the non-disclosure was coming into play as the negotiations were getting started, and so they. Obviously, when you're negotiating, when you're in discussions, sometimes confidential information and material surfaces. So that's the example of a non-disclosure and we will use that as we go through the different points. The other piece that came up was a copywriter needed to know how to navigate, being asked to sign a service provider contract that contained a non-compete clause, and this is a very common occurrence in the online realm for both designers, developers, copywriters in that someone says great, you can build my site or write my site, but I don't want you building or writing any other sites. That would be competitors. Well, as you can imagine, that is really going to limit who you work with. So let's, now that you kind of have a playing field for where this might show up, I want to walk you through how you can decipher and how they all come into play. So when you are in the realm of operating your business, you need to know how to compare and contrast non-compete clauses and non-disclosure agreements.

Speaker 1:

Now, a non-compete clause is just that it is a clause. It is showing up within a larger agreement. A non-disclosure agreement can stand on its own. It is not a clause, it is an actual we'll call it a big kid document. It can stand on its own merits and operate as itself. Now this is happens. They come up all the time. Now the primary features, which is where I wanna start, because this, I think, makes it easy to remember them.

Speaker 1:

Non-compete has to do with competition and what this does is typically, this will prohibit an employee or a contractor from providing or engaging in a similar job that they've been hired for, their profession, their trade, in competition against the person that hired them, so they're employer. Now, as you can imagine, in this gig economy it gets really important knowing am I an independent contractor or am I an employee? Those are definitely episodes for the future. So non-competes are not often going to show up in an independent contractor situation, and I will use a very, I think, memorable situation. Let's imagine that you hired a plumber to come in and work on your kitchen in your house. You could not ask that plumber to sign a non-compete and not work on anyone else's kitchen in, say, your neighborhood. That would be ridiculous, right Like. That is just the most ridiculous thing. That's similar. When you're asking and restricting people, you've got to be really clear on where the competition is happening.

Speaker 1:

Now, primary feature of a non-disclosure this is to protect confidential information. So the parties involved agree not to disclose confidential or proprietary information that are being shared during the course of business, during the negotiations, during the discussions, during the scope of whatever the business purpose is that's going on. So this really, especially in online businesses, this will really happen during negotiations. Now, ndas can also show up and are a much better fit in terms of the copywriter example that I've given you a non-disclosure agreement, as someone is hiring you to build their website or to create their online course or to write copy for them. In the midst of that, you may be privy to all kinds of information that's not publicly available. In those situations, a non-disclosure agreement makes perfect sense and a non-disclosure again driving at the heart of confidentiality.

Speaker 1:

More often than not, your contract for your service providing services that you're doing that should have language in it that deals really well with confidentiality and makes you feel safe and also makes the people that are hiring you feel equally as safe. So we know the primary features. You have non-compete, which has to do with competition, and then you have confidential, which has to do with keeping stuff a secret. Now, when you're dealing with non-compete clauses, it also will have to do with the three T's, and this has to do. The three T's are time, topic and territory. Now you could also say a specific timeframe, a geographical scope covering the nature and scope of the business. I find it's easier to just remember three T's time, topic, territory. In a non-compete situation, this needs to be negotiated by both parties, so an employer versus an employee. If you are signing an employment contract, you are negotiating that non-compete. You are aware of that non-compete when you are signing it. That is important because I can't make you not work and not compete forever. But the amount of time that you can't compete, the topic that it would cover meaning the nature of the business and the territory how much you know geographical area comes into play, which is you can add in with online businesses, we all work for the entire world. So let's look at a few of the purposes and the benefits which we will alluded to a little bit.

Speaker 1:

The non compete is just that. It is aimed to stop competition and potential threats by x employees, by former contractors, and that is why because you got information behind the scenes, you learned the trade secrets, you learned the processes, you learned whatever it might be, because you had that Relationship with the employer, the person paying you money that the public didn't have, and so, yes, you're working for us, but we're all running businesses. You know we need to keep certain things, not public knowledge. That is a thousand percent okay. The law absolutely will protect that. The NDA, on the other hand, is keep it, keep the secret, like keep the secrets, keep it confidential, don't share with competitors so you can see how they are easily confused. I have the information. I need to keep it a secret. So NDA is a place I have the information, but I can't compete. That's the non compete.

Speaker 1:

Now the purpose and the benefits Really, they travel and they're completely in line with okay. Why don't we like these? What are the potential drawbacks? And for a non compete cause the reason that Courts and the law does not like them unless they are negotiated on both sides and I'm Work in the situation of two people in an employer and employee, a person with the money, a person receiving the money. The reason that the law does not like them Is they can be overly restrictive. They can limit your ability to work. They can limit your ability to pursue other opportunities. So there are Many places, especially in the states, where states have basically just said look, they're completely unenforceable, we're not even going to talk about it unless it's fits this very narrow Set, a fax, in circumstances that is going to be highly negotiated.

Speaker 1:

It will not be like oh whoops, I signed that contract and there's a non compete in there and I didn't understand it. The courts gonna grab their Metaphorical big black sharpie marker and just cross that out. It's not going to come into play. Now, if you are negotiating the sale of a business and there is a legal team on both sides and part of the sale of the business is that you agree not to Launch your competitive business right down the street from where they're located, then there could be a non compete that says look, within a 20 mile radius, I agree not to set up shop. That's a much Better set of facts and circumstances where the law might even give it a little bit of a chance of standing and being enforceable for a non disclosure agreement. This is where I see so many Online businesses who really think they're doing the right thing. They heard a podcast, they've been in a group, they've taken a program. They is.

Speaker 1:

I like to say, you know just enough law to be mildly dangerous. I was that person during my first year of law school. I knew just enough law to be mildly dangerous, and this is an area that you can easily rectify, like you can clean this up now before you end up in a situation where it doesn't do you any bit of good, where you thought it was going to do you some good. And the reason for this is, if you have a non-disclosure agreement and you have not drafted it properly, it is not written properly. It is going to likely be either way too broad in terms of what can I talk about, like what is actually confidential in this or way too narrow, not giving you enough protection. And so when you are working with putting an NDA together to give other people to sign, you want to be really clear about what's the business purpose. What do I need to stay a secret because it's not currently available to the public and also pursue this negotiation, pursue this opportunity, pursue this discussion, whatever the case may be. So in looking at all of this, I think it's really, really, really important to know where you think you're going to enforce this, because that is really going to come into play and in the global world that we are all living in, where information can go public with the click of a mouse, it's really important not to just know. Okay, here's this legal document that can kind of sort of help me maintain what I want, which is limit the competition or reign in the competition or keep things a secret.

Speaker 1:

Remaining confidential is really vetting way. Before you get to the point of the competition or the confidentiality, who are you working with? Who are you sending proposals to? Who are you bringing in to the inner circle? Which? Inner circle just meaning information not available to the public? Some of it matters a lot. Some of it is like, well, it doesn't matter if it's out there or not. But before you get to the point of becoming a real world example and there are lots of real world examples and I thought about running through all kinds of real world examples and then I realized that's not really helpful, because you change one fact in circumstances and the whole thing could go the other way, and I realized what was really important was this point that I try to make explicitly clear all the time when I am working with online businesses, when I'm talking through different issues that come up inside Bizzlebox and that is vet who you are working with Don't share information with 40,000 of your closest friends.

Speaker 1:

And a situation that was brought up with the Bizzlebox member who needed an NDA because of the discussions with the large university and the billion dollar corporation was the introduction that AI has brought into the equation. And this is where those of you that are loyal listeners thank you so much know I geek out because the law is so vibrant it is to me. It's perfectly if I had to like wrap it up in a couple of words. It's structured flexibility. It is here's your framework, but I can adapt to a wide, wide variety of situations, and AI, as I was looking, revising contracts which I've been doing since you know AI became the global powerhouse that it is and will continue to be is making sure that, especially for non-disclosure agreements, having very clear expectations and wording that could be legally enforced of.

Speaker 1:

If I'm providing confidential information. You cannot take this and dump it into chat GPT and say, hey, provide me a summary of this ridiculously long document or help me understand whatever this may be. And this is definitely proactive, it is forward thinking. I don't think there are any cases that have even begun to make their way into the legal system on this, but I'm all about prevent the mess a thousand percent. If I send you a 50 page document and you're like, oh my gosh, like I don't know what this is talking about, like really, what's the gist? Cause these things are not always the best well-written thing and I'm like, oh, I'm a resourceful entrepreneur, I know how to run 87 things while I'm doing 20 other ones. I'm just gonna pop that, a section of that into chat GPT and boom, it'll give me a summary and I can simplify the language or whatever the case may be.

Speaker 1:

Well, I see that as being a problem, especially in situations where a non-disclosure is valid and it's warranted, because you just took all that information and dumped it, which we know it's on the internet. We know, once it's out there, you can't claw it back. So that is one piece. For those of you that have NDAs, you might wanna take a look at them and look at it in the context of hmm, do we need a clause in here that addresses I don't want you dumping this into an AI tool. I don't want this information out there where it can be scooped up. And yes, I understand that AI is nothing. It's running analytics all the time. It's pulling things from different places.

Speaker 1:

But in certain situations, I'm pretty sure companies and businesses like yours don't want that information out there on the interweb. So that is when the real world examples are filling my world vet the people that you're hiring, vet the people that you are disclosing information to that you are bringing into your business and then really think through is this a situation where I need to limit the competition aspect? If it is, you need that negotiation at the beginning, because you can't just toss it in at the end because the court will likely toss it out. And for non-disclosures when you are discussing things, when you're bringing people in to help you with the sale of your product, the building of your site, the writing of your copy, all of those pieces, I think non-disclosures are completely appropriate, and also now, with the advent of AI, making sure that they stay as confidential as you want them. So, as you are navigating the world of online business and I love it, I know you love it it is our vehicle for doing so much out there in the world, for really taking ownership and creating and delivering and impacting.

Speaker 1:

And all of those pieces know that Bizzlebox is here for you. If you haven't yet hired legal for your business team, you have to hire a legal. Plain and simple. You need legal, just like you need accounting and you need a website and you need email. All of those pieces.

Speaker 1:

Take our quiz. It's at Bizzleboxcom. It's a really fun quiz. It's a pretty easy quiz. It lets you know how legally prepared you are and you can really take a look at the ways that Bizzlebox can stand in the gap between that panicked midnight Google search and the really expensive hourly law firm, such that when you have a situation like my Bizzlebox member did, where it was like, oh, I actually need some help and put me in the right direction, because this call is happening today and it wasn't a post that needed to happen in a Facebook group with 40,000 people that again know just enough law at times to be mildly dangerous, helpful, but don't realize that they're actually hurting because their information is incomplete and knowing yep, here's the document.

Speaker 1:

Let's ask some clarifying questions. Are we signing things yet? Because oh, and this is one point I do wanna mention before we finish up our chat today when you are especially for non-disclosure agreements and this is a sneaky, sneaky, sneaky little trick that definitely happens far more in corporate business or where you have businesses that have multiple different arms of the business, which is becoming far more common in a good way, and that is making sure that the right person and the correct legal entity is signing the NDA. Because if I send the NDA and someone signs it, who's not the actual legal entity or the person that is legally responsible for consequences of disclosure? You have a worthless and the a. You have a signed piece of paper. That's lovely. I can sign a piece of paper for you. I can sign it. You know, random piece of paper in the garbage that's the equivalent of it, and you will spend so much time If the situation warrants it. In most situations I'm gonna be like it. The situation won't warrant this, because we're just not doing In a common way the nature of deals that are handled in these situations and that is, hiring attorneys to then fight it out that, nope, this person signed, but the intention of this document was x, y, z.

Speaker 1:

This is now no longer confidential. This has cost me business. This has you know, I have suffered specific Financial and opportunistic damage type deal. So make sure when you are using a non disclosure agreement, I'm not compete, not so much because usually the person that's negotiating Once what you have, you're hiring them, you're paying the money, they're going to give you the correct information, but a sneaky, sneaky thing for non disclosures, especially when there's lots of people in the mix, where I'm gonna use this situation at hand.

Speaker 1:

You have a national university in the states. So, oh my goodness, thousands, tens of thousands of people, and you have a corporation worth billions of dollars. They for sure have lots of different arms, they have lots of different business entities. So it would be really easy to say, oh Yep, I signed it, but that person had nothing, they weren't even the right department, they weren't in the right area. So I'm Totally forgot to share that as we were going through.

Speaker 1:

But that is another area that you really want to make sure that you pay attention to. So I hope that gives you a little more clarity between non compete, which is all about restricting competition and business likes competition. However, we Oftentimes will do our best to create fair competition. We don't want to restrict it so much so that someone can't work, can't make a living, can't do what they are talented and should be allowed to do. And on disclosure, which is, if you had a special relationship to be Privy to the secretive information, the information not available to the general public, then we'd really like you to keep your mouth shut.

Speaker 2:

Thanks for tuning in. If you enjoyed this episode, please leave a review and share it with a friend. At the box, we love helping entrepreneurs succeed. We offer a variety of reliable, easy to use tools at the box dot com. Our goal is to help you have a profitable and legally secure business so you can make your impact well in, fully on your Terms until next time. Take what you've learned and put it to work for you.