{"id":432,"date":"2021-04-01T10:12:22","date_gmt":"2021-04-01T14:12:22","guid":{"rendered":"https:\/\/www.harmonizehq.com\/blog\/?p=432"},"modified":"2021-06-08T01:53:17","modified_gmt":"2021-06-08T05:53:17","slug":"nda","status":"publish","type":"post","link":"https:\/\/www.harmonizehq.com\/blog\/nda\/","title":{"rendered":"Complete Guide to Non Disclosure Agreements (NDA)"},"content":{"rendered":"<p>Confidential information is often primary to the operation of a business. It can include information that is core to the business\u2019 operation &#8211; information about its financials or even information about clients. This information can be harmful if it gets in the hands of the wrong people. This is why confidentiality agreements are used by many companies to protect their trade secrets and interests.<\/p>\n<p>This article will give you an overview of confidentiality agreements and their use in the employer-employee relationship.<\/p>\n<p>Disclaimer: Our article is intended to be a summary of the rules around confidentiality agreements. It is in no way intended to constitute legal advice. Seek legal advice in your respective jurisdiction prior to implementing an NDA.<\/p>\n\n<h2><span style=\"font-weight: 400;\">What is a Confidentiality Agreement?\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Confidentiality agreements, also called non-disclosure agreements (NDAs), are primarily used to protect confidential information in a business setting. NDAs can be introduced in any relationship. For example, in an employer-employee relationship, a doctor-patient relationship or an attorney-client relationship. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">This article mainly focuses on the employer-employee relationship with a particular focus on the employer. If you are an employee, watch the video below<\/span><span style=\"font-weight: 400;\"> explaining how NDAs affect you. <\/span><\/p>\n<div class=\"lyte-wrapper fourthree\" style=\"width:480px;max-width:100%;margin:5px auto;\"><div class=\"lyMe\" id=\"WYL_i79lnClHhdM\"><div id=\"lyte_i79lnClHhdM\" data-src=\"https:\/\/blog.harmonizehq.com\/wp-content\/plugins\/wp-youtube-lyte\/lyteCache.php?origThumbUrl=%2F%2Fi.ytimg.com%2Fvi%2Fi79lnClHhdM%2Fhqdefault.jpg\" class=\"pL\"><div class=\"tC\"><div class=\"tT\"><\/div><\/div><div class=\"play\"><\/div><div class=\"ctrl\"><div class=\"Lctrl\"><\/div><div class=\"Rctrl\"><\/div><\/div><\/div><noscript><a href=\"https:\/\/youtu.be\/i79lnClHhdM\"><img src=\"https:\/\/blog.harmonizehq.com\/wp-content\/plugins\/wp-youtube-lyte\/lyteCache.php?origThumbUrl=https%3A%2F%2Fi.ytimg.com%2Fvi%2Fi79lnClHhdM%2F0.jpg\" alt=\"\" width=\"480\" height=\"340\" \/><br \/>Watch this video on YouTube<\/a><\/noscript><\/div><\/div><div class=\"lL\" style=\"max-width:100%;width:480px;margin:5px auto;\"><\/div><\/p>\n<p><span style=\"font-weight: 400;\">In short, whoever the NDA applies to is prohibited from disclosing specific confidential information as predicated in the NDA.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Most often, NDAs are included as part of the contract of employment, but they can be implemented at any stage in the relationship. For example, at the start of a new job or after a dispute has taken place or has been settled. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Most NDAs take effect from the moment that they are signed, so it\u2019s important to have employees sign them as early as possible so that no confidential information is divulged to them prior to their signing the NDA.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For an NDA to take effect, the employee needs to read, agree, and sign it. Employers can choose to require that a witness to the NDA. This can be useful if the employee later denies affirming the agreement and the witness can be called to give evidence.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Unilateral vs Bilateral vs Multilateral NDA<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">NDAs can be designed to be unilateral or bilateral. Unilateral NDAs only affect one party to the agreement whereas a bilateral agreement applies to both parties. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">In most employment contracts, only a unilateral NDA is required so that the employee does not disclose confidential information. In client relationships, a bilateral NDA may be required where both parties have the potential to disclose confidential information about the other party.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There is also another type of NDA \u2013 the multilateral NDA \u2013 but it is not as widely used. It is applied when there are more than two parties who have the potential to disclose confidential information. In employment relationships, unilateral NDAs are most common, and multilateral NDAs are rarely applied. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Multilateral may nevertheless come in useful to your business when working on deals with multiple parties who all have the potential to disclose confidential information.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">What an NDA Cannot Be Used For?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">While NDAs can be used for keeping many types and sources of information confidential, there are a few cases where they cannot be used. NDAs cannot be used to stop employees from:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Claiming harassment or <a href=\"https:\/\/www.harmonizehq.com\/blog\/microaggressions-workplace\/\" target=\"_blank\" rel=\"noopener\">discrimination<\/a><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Reporting a crime<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Whistleblowing<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Reporting inappropriate behaviour<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">In these situations, it would be inappropriate to use NDAs to suppress information. Where an NDA attempts to silence employees and stop them from whistleblowing or reporting a crime, it will be considered invalid. If an NDA is invalid, it will no longer be binding on the employee. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, it is legal in most nations to use an NDA to cover up a settlement that arises or follows on from reporting a crime or whistleblowing.\u00a0<\/span><\/p>\n<p><img loading=\"lazy\" class=\"alignnone wp-image-435 size-large\" src=\"https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-excludes-Whistleblowing-1024x682.jpg\" alt=\"NDA excludes Whistleblowing\" width=\"1024\" height=\"682\" srcset=\"https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-excludes-Whistleblowing-1024x682.jpg 1024w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-excludes-Whistleblowing-300x200.jpg 300w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-excludes-Whistleblowing-768x512.jpg 768w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-excludes-Whistleblowing-930x620.jpg 930w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-excludes-Whistleblowing.jpg 1280w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<h2><span style=\"font-weight: 400;\">Legal Information Requirements for an NDA<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Most countries require clearly drawn up NDAs, so it\u2019s important to include some basic information within the agreement.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Identify the Parties to the NDA<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Clearly identify all parties by name and address. <\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Define what Confidential Information is Protected by the Agreement<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Make the definition wide enough so that it will fit all types of confidential information within its limits.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">The Meaning of Confidentiality<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Outline what confidentiality means within the remit of the agreement. <\/span><span style=\"font-weight: 400;\">Highlight the limitations of the agreement.\u00a0<\/span><span style=\"font-weight: 400;\">Write this clause in plain English without any legal jargon so that all parties can easily understand the need for confidentiality.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Any Exclusions to the NDA<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">It is important to include any situations in which the NDA will not apply or where it will fail to apply. One such situation is where the law requires disclosure. In such cases, the NDA is overruled by the law of the state.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The NDA should declare all such situations so that the limits of the NDA are clearly written and communicated. If it is not, a court may declare that the NDA is ambiguous and therefore, not binding on your employee.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Who the Employee can Share Information with<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">To meet the criteria of clarity, it would be beneficial to list all parties who can receive the information and what they can do with that information. It would also act as an instruction sheet for your employees as well as third parties who receive such information.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Time Limit<\/span><\/h3>\n<p>Clearly define the lime limit of the NDA and when it will cease to apply to an employee. Either provide a specific date when it will expire or a specific number of days\/months\/years from the date that the agreement is signed.<\/p>\n<h3><span style=\"font-weight: 400;\">Independent Legal Advice<\/span><\/h3>\n<p>All parties to the agreement are entitled to independent legal advice. This is to stop any bias from the legal team of the employer. It is recommended that employees get frequent legal advice as the law around confidentiality changes often and the law may differ in their state.<\/p>\n<p><img loading=\"lazy\" class=\"alignnone wp-image-436 size-large\" src=\"https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-Time-Limit-1024x769.jpg\" alt=\"NDA Time Limit\" width=\"1024\" height=\"769\" srcset=\"https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-Time-Limit-1024x769.jpg 1024w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-Time-Limit-300x225.jpg 300w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-Time-Limit-768x577.jpg 768w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/NDA-Time-Limit.jpg 1280w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<h2><span style=\"font-weight: 400;\">Time Limit on an NDA<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">It is important that you include a time limit for your NDA to define how long it will remain binding upon the employee. The length should be realistic. Ideally, the employee would be bound for the entirety of the duration of their employment and an additional year or two to ensure that the employee cannot simply quit and reveal the confidential information to a competitor. To back up an NDA, it may be wise to ask your employees to sign <\/span><a href=\"https:\/\/www.investopedia.com\/terms\/n\/noncompete-agreement.asp\"><span style=\"font-weight: 400;\">non-competes<\/span><\/a><span style=\"font-weight: 400;\"> so that they cannot switch over to a competitor and take trade secrets with them.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The time limit for an NDA also cannot be too long \u2013 e.g. for life. In such a scenario, were an employee to breach the agreement, then the court may find that the agreement was too restrictive, to begin with and opt to nullify the agreement. So, it\u2019s important that a reasonable time limit be attached to it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Additionally, time limits can be attached to individual clauses or types of information. This is important for trade secrets as they are often recognised as having no time limitation. This allows the employer to impose confidentiality upon employees for life regarding trade secrets. See <\/span><a href=\"https:\/\/www.everynda.com\/blog\/trade-secrets-v-nda-agreements\/#Indefinite_period\"><span style=\"font-weight: 400;\">here<\/span><\/a><span style=\"font-weight: 400;\"> for more information on what it takes for information to qualify as trade secrets.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For other pieces of information, such as the trade secrets of client companies, the same time limit may be attached. However, for other pieces of information which are time-sensitive, it may only be reasonable to enforce confidentiality for as long as it remains sensitive.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Termination of Confidentiality Agreements<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A non-disclosure agreement cannot be unilaterally terminated by the employee. The employer must agree to end any such unilateral confidentiality agreement. If the agreement is bilateral or multilateral, then the express agreement of each party to the agreement is required. Furthermore, the agreement of other parties may be required in some circumstances \u2013 such as that of the data subject.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Breach of a Confidentiality Agreement<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Breach of an NDA can be very serious and the remedies available are proportionately serious. The best option for you as a company is to stop the breach from occurring in the first place. This can be done by obtaining an injunction by way of a court order. This is a legally binding order to prevent the individual from disclosing confidential information.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But if the confidential information has been disclosed by the employee then your options are limited. You cannot simply take back what they have disclosed. Therefore, the most effective and useful tool is to get monetary relief for any damage caused due to the breach. The legal action can be taken under multiple limbs of the law. Some of these are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Patent Infringement &#8211; the use of or disclosure of a patented product or process without the patent holders permission.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Copyright Infringement &#8211; the unlawful use of or reproduction of copyrighted material such as a piece of writing or music.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Misappropriation of Trade Secrets &#8211; disclosure of a trade secret without express or implied permission of the trader.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Breach of Fiduciary Duty &#8211; when information is divulged outside a legal or ethical relationship. For example, this can be between an employee and an employer or an employee and a client.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The best practice is to include the options for legal action within the NDA itself so that the consequences are clearly laid out for the employee.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You may also opt to use an injunction after confidential information has been disclosed if its effect is far-reaching. For example, this could be when an employee has disclosed information regarding a new product to a competitor. You may then be able to go to court to get an injunction to stop the competitor from bringing that product to market.\u00a0<\/span><\/p>\n<p><img loading=\"lazy\" class=\"alignnone wp-image-437 size-large\" src=\"https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/Additional-NDA-Clauses-1024x683.jpg\" alt=\"Additional NDA Clauses\" width=\"1024\" height=\"683\" srcset=\"https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/Additional-NDA-Clauses-1024x683.jpg 1024w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/Additional-NDA-Clauses-300x200.jpg 300w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/Additional-NDA-Clauses-768x512.jpg 768w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/Additional-NDA-Clauses-1536x1024.jpg 1536w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/Additional-NDA-Clauses-930x620.jpg 930w, https:\/\/blog.harmonizehq.com\/wp-content\/uploads\/Additional-NDA-Clauses.jpg 1920w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<h2><span style=\"font-weight: 400;\">Additional Clauses to Include and Address in a Confidentiality Agreement<\/span><\/h2>\n<h3><span style=\"font-weight: 400;\">Type of NDA and Who are the Parties Involved<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Include whether it is a unilateral, bilateral, or multilateral contract and explicitly list the parties to the NDA.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Type of Information<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Explain the types of information that the NDA covers. For example trade secrets, client details, client business secrets, details of any patent applications, customer lists, and financial information relating to the company or any client.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Time Limit Per Information Type<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">This should include a list matching the type of information to an appropriate time limit that the information should be kept from being disclosed to a third party.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Exclusions from Confidentiality<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">This should contain all exclusions to the confidentiality agreement. For example:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">where the information has come to the employee\u2019s attention from a third-party source<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">where the employee had knowledge of the information prior to signing the confidentiality agreement<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">when the information is widely available to the public<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">where the information relates to a crime<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">when the information is used for the purposes of whistleblowing<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">if the information is subject to a subpoena or court order that requires disclosure<\/span><\/li>\n<\/ul>\n<h3><span style=\"font-weight: 400;\">Consequences for Breach<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">This should outline the consequences that the employee may face where they breach the NDA. Consequences can include:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Disciplinary action\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Dismissal or suspension without pay\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Legal action \u2013 under this section, you may opt to list all the possible forms of legal action that the company can take.\u00a0<\/span><\/li>\n<\/ul>\n<h3><span style=\"font-weight: 400;\">Effective Period of NDA<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The clause should outline how long the NDA is effective upon the employee. The general rule of thumb is to add a few years to the date that the employee stops working for the company so that no secrets are immediately disclosed. This also allows the company to rest easy knowing that no confidential information can be sold to competitors without penalty.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Treatment of Confidential Information<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Describe how confidential information should be treated within and outside of the workplace. For example, details of encryption methods required when transferring such information should be outlined here. Further information on disclosing such information to third party contractors may also be outlined here.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Additionally, the information should only be used for purposes that the company has outlined beforehand. These may also be listed here.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You may also produce a list of staff that the information can be reproduced in front of \u2013 but instead of listing names, their positions may be sufficient.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Application of the Agreement to Third Parties<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">When the information is disclosed to third parties, the employee should make the third party aware of the need for confidentiality and that they are obliged to do the same. The third party\u2019s obligations regarding disclosure, use and security should be laid out here.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The employee should be reminded and obligated to bring them up to any third party to whom the information is disclosed.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Injunctive Relief<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">This clause should be used to highlight that you have the option to seek an injunction before the employee commits the breaching act. This allows you to receive a quick and effective remedy to stop the harmful act, instead of merely receiving a monetary remedy after an employee has breached the agreement.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Jurisdiction\u00a0<\/span><\/h3>\n<p>As NDAs are widely used and adapted in many countries with many different rules and regulations, it is wise to choose an explicit jurisdiction in which the NDA is based \u2013 usually the same country as where your company is located. This allows for the rules around its creation and application to be explicit and clear.<\/p>\n<p>We&#8217;ve done our best to deal with most NDA requirements for employers. Is there anything you think is missing in our guide? Reach out to us at <a href=\"https:\/\/twitter.com\/harmonizehq\" target=\"_blank\" rel=\"noopener\">@HarmonizeHQ<\/a> and let us know.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Confidential information is often primary to the operation of a business. It can include information that is core to the business\u2019 operation &#8211; information about&#8230;<\/p>\n","protected":false},"author":2,"featured_media":434,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[8],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v18.4.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Business Guide to an Airtight NDA | HarmonizeHQ<\/title>\n<meta name=\"description\" content=\"An NDA is used by companies to protect their trade secrets and interests. 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