There isn’t a week that goes by without Non-Disclosure Agreements or NDAs making news, and it’s not hard to see why.
Maria Miller, the former culture secretary and Conservative MP, is a campaigner against using NDAs. “I’m keen to see the misuse of NDAs tackled in the next employment bill. I was involved in the recent pledge to stop the use of NDAs at universities.”
The problem with NDAs is that they can be a tool to cover up wrongdoing.
Campaigners against NDAs believe they have been endemic in certain sectors to cover up fault on matters pertaining to the heart of employment rights like racism, discrimination and harassment.
Maria Miller’s specific involvement is with ex-employees of Channel 4 News. However, the BBC has taken the lead in broadcasting and doesn’t use NDAs for anything except intellectual property.
NDAs are not just relevant to employment matters, although this is where they seem to be most high-profile. NDAs protect confidential information and are an essential tool in commercial interactions.
NDAs protect legitimate business interests and confidentiality obligations. Rather like a car, if you use them properly, you won’t get into difficulty or commit an offence!
Common Things are Common
NDAs protect businesses of all sizes, types and ages. They’re as relevant to a start-up as they are to an established, long-standing organisation with a high number of employees.
Non-Disclosure agreements can be part of a contract with anyone with whom a business interacts. They can also be included in an employment contract within the staff context. They ask the signatory to keep some proprietary knowledge or sensitive data confidential.
Most NDAs relate to a commercial relationship with a third-party organisation. However, they can be relevant to employees during and after the job finishes if the signatory is an employee.
But isn’t negotiating NDAs a bit of a bump in the road, an irritating extra layer of bureaucracy or something that’s just not relevant to your business?
A List of Popular Excuses
What if the NDA is unrealistic or unreasonable? You’ve pulled up something suitable to gag the Prime Minister without considering the document’s relevance or the potential impact on the signee.
They push it back across the desk.
Many people use a standard form without really understanding how it pertains to their business, and it can end up offering inadequate or no protection at all because it’s just too generic.
Negotiating NDAs is just another hurdle, and many people fear it will put off that essential new business signing. Is yet another form pinging over on email a form too far?
The truth is most busy businesses just don’t see or understand the importance of an NDA to protect confidentiality obligations until it’s too late. Ignorance is bliss, well, for a while anyway.
Why NDAs (Non-Disclosure Agreements) are Relevant to Your Business
NDAs apply to a vast range of businesses and sectors, but looking at different scenarios can make it easier to understand why you should use one to highlight and protect the importance of confidentiality obligations.
- Business negotiations – could be a merger between two companies or a buyout. Sharing sensitive data is essential, but this scenario is ripe for exploitation, particularly if the deal fails.
- Business collaboration – this covers anything from working together on a mutual project to developing a product.
- Collaboration with external partners – hiring freelancers, consultants, or agencies is all part of it these days. This inevitably means sharing sensitive or confidential data, including sales lists for your product range, business strategies or the secret ingredient in the new jerk chicken sauce.
- Innovations, licensing and patents – sharing new ideas with investors or licensing or patenting an invention require very protective disclosure to prevent leaks and stop competitors from gaining an advantage.
- Employee onboarding – NDAs help keep sensitive data safe during employment and afterwards. They can prevent a former employee from working for a competitor for a certain period or setting up their own business in direct competition.
What You Should Focus on in an NDA
There are certain critical areas of an NDA which are troublesome. This may be because they are unfair or unreasonable in content or problematic in practice.
Duration of an NDA
Any restrictions must be reasonable in their time limit; anywhere between six months and three years is usual. Five years is considered too long, but it all depends on the nature of the sensitive or confidential information. The duration of an NDA is linked to the information it seeks to protect.
How far along the food chain should the NDA extend? Some NDAs extend confidentiality obligations to include permitted recipients of the party receiving the data. An element of cascade may be necessary.
Should the NDA also require them to sign, or is the receiving party responsible for their compliance?
Returning or Deleting Confidential Information
An NDA gives the disclosing party the right to the return or the deletion of confidential information at any time, perhaps because the business relationship falters or because it has reached a natural conclusion without disagreement.
In reality, deleting sensitive data is hard to implement and police across multiple devices and storage systems not within the disclosing party’s control.
Indemnity for Breach of Obligations
Inserting an indemnity provision in a Non-Disclosure clause or agreement can be the sticking point either because of its scope or just its mere presence.
Asking the receiving party to accept an indemnity against loss, liability and damage arising out of its breach or non-performance of its obligations regarding the use and safeguarding of sensitive or confidential information might be a bridge too far.
The disclosing party can impose non-solicitation clauses, often used when both parties are direct competitors. The meaning or purpose of non-solicitation clauses is to prevent one party from soliciting or offering employment to the discloser’s employees.
In employment, an NDA should not be a blanket bomb; limit it to key and/or senior employees with real access to sensitive information.
NDAs applied across the board could be challenged by more junior staff members if their work or the information they access is not confidential.
Protecting your Business with a Paper Rock Template NDA
Our carefully crafted NDA templates cover myriad business situations where confidentiality obligations exist and to protect sensitive data and proprietary business information.
We’ve done all the legwork, so our templates are easy to use, and you can relax safe in the knowledge that experienced legal professionals produce all our documents, plus, there’s a guidance note with each one to help you tailor the agreement to your specific requirements.