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In the ever-evolving landscape of the cannabis industry, the use of non-disclosure agreements (NDAs) is becoming more prevalent as the demand for difficult to grow exotic strains increases and more brands and businesses flood the market. Previously we have blogged about the importance of NDAs to safeguard confidential business information. Cannabis businesses should continue to use NDAs, but must take care to not structure them as disguised covenants not to compete or they will lose all value.
Legal scrutiny and enforceability
To maintain a competitive advantage in the cannabis industry that is now facing serious challenges to remain profitable, many employers have greatly expanded the scope their NDAs and made their execution a condition to employment. However, in California, the need to protect trade secrets and confidential information is balanced against a strong public policy favoring employee mobility and competition. As a result, over inclusive NDAs will not withstand the scrutiny of California Courts and will not be enforced.
Navigating legal frameworks
Per California Business & Professions Code section 16600, absent statutory exception, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is
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