Do I need to get an employee or a contractor to sign a Non–Disclosure Agreement (NDA)?

Even if your company doesn’t have top-secret information, like code for a killer new social network or the recipe for Coca-Cola, you have other types of valuable information that need to remain confidential or private.

It could be your customer list, your financial records, or ideas for a new marketing campaign. So how can you protect that information? Many people think that a NDA is the answer!

What is a NDA?

A NDA is basically a contract that binds someone to keep a secret. Its main purpose is to create a confidential relationship between a business and its contractors, employees, and any other business partners who might get a behind-the-scenes look at your operations.

The NDA is designed to prevent these individuals from revealing anything that should stay “in-house” including client information, marketing plans, financial data, competitive analysis, technical information, etc. Perhaps you simply don’t want a subcontractor to talk directly with your clients and disclose their role.

What are the key elements of a NDA?

When hiring a contractor, an NDA helps establish what he or she can and can’t reveal about your business and work. A typical NDA will include the following key components:

PROTECTED INFORMATION

Not every bit of your company information needs to be kept secret. For example, will it really matter if anyone finds out who your email provider is or where you get your coffee? While you might think that it’s best to just leave this as broad as possible to protect any and everything, it’s wise to be very specific about what can’t be disclosed publicly.

By spelling out exactly what should be covered, you make sure that the contractor is on the same page. For example, a new contractor may not even realize that they shouldn’t contact your client directly or that you don’t want anyone to know about a new website until it’s released.

TIMEFRAME

Most NDAs don’t last for infinity. You should specify exactly how long the information should stay confidential. This can be as short as the duration that the contractor will be working for you, or a set length of time (such as five years, which is a pretty common term).

OBLIGATIONS

You may need to define what the contractor can or can’t do with the protected information. In most cases, it would make sense to include that they cannot reveal confidential information to anyone outside of your company. But, in some cases, you may want to add some caveats to this. For example, are there some cases where they can use/disclose confidential information? Perhaps if they have your written approval?

What Next?

Many people think that a non-disclosure agreement is one of the best ways to protect your business when hiring an independent contractor or an employee, and they wouldn’t be wrong! However, a well written employment contract or contractor agreement, should include all the elements required of a NDA, so make sure your contract of employment or contractor agreements are fit for purpose, as one size does not fit all!

And keep in mind that an NDA, or a contractor agreement is just a document. It doesn’t guarantee that someone won’t steal or misuse your confidential information, but it does give you an opportunity to seek legal recourse if they do.

Watch out for

It is anticipated that legislation this year will curb the use of NDA provisions in employment contracts and settlement agreements alongside a requirement for independent legal advice to be provided to individuals asked to sign an NDA. New enforcement measures will be introduced for NDAs in employment contracts and settlement agreements that do not comply with legal requirements.