When you need to share sensitive or private information, you may consider using confidentiality contracts.
Some of the most used are non-disclosure agreements (NDAs). These legal agreements let you control how far and wide private information can go.
But NDAs comes with their own vital legal steps you need to comply with first. If you fail to follow them, the consequences can lead to crippling business penalties.
In this guide, we’ll learn all about non-disclosure agreements, how they work, and the legal consequences of breaking agreement terms.
What is a non-disclosure agreement?
A non-disclosure agreement (NDA) is a legal contract that allows information or ideas to be shared in confidence. They’re also known as confidentiality or privacy agreements.
When an NDA is signed, all parties have legally agreed to keep information private from third parties. This is to protect the information or stop it from reaching competing businesses. This includes:
- Customer information (like GDPR data).
- Intellectual property (like copyrights and patents).
- Service information (like manufacturing processes).
- Operations information (like financial reports).
The written agreements can be used in employment contracts, settlement plans, or individual documents.
When are non-disclosure agreements used?
NDAs can be used when releasing sensitive information, starting a new job, or during a workplace conflict.
They can be sent from an employer to an employee, or during potential business acquisitions .acquisitions.
NDAs should never be used to:
- Stop criminal acts being reported to the police.
- Avoid addressing workplace conflicts.
- Silence whistleblowing cases.
- Cover up inappropriate behaviour or misconduct.
Instead of enforcing NDAs as a company-wide rule, you must manage cases through fair grievance procedures.
Different types of non-disclosure agreements
NDAs can either be unilateral (where one party shares confidential information) or mutual (both parties agree to either share information or keep it private).
Choosing contracts depends on what outcome you’re looking for, and what either party have agreed to. Some common NDA clauses include:
- Non-compete clause: Stops you from using the information to start a competing company; or giving it to competitors.
- Non-solicit clause: Stops you from using the information to persuade employees or clients to join your company.
These terms are commonly used because they provide legal protection. But enforcing them varies on individual jurisdiction.
How do non-disclosure agreements work?
Firstly, you need to determine whether the confidential information needs to be shared. Sometimes, sharing is unavoidable, like when you bring someone into a project that hasn’t been publicly announced yet.
If you choose to apply for an NDA, you need to hold a formal meeting. Here, two parties are involved–the disclosing party (provides the information) and the receiving party (given the information).
During the meeting, a non-disclosure agreement form is presented to the receiving party. The agreement should include:
- Identification: All parties are included in the agreement.
- Definition: The nature of confidential information is defined.
- Obligation: The receiving party is given obligations for the information (to either keep confidentiality or not use it themselves).
- Exclusions: Highlights what is and isn’t legally bound within the rules of confidentiality.
Once an agreement has been met, the NDA needs to be signed by relevant people. Keep a record of the time, date, and minutes of the meeting.
In the UK, non-disclosure agreements can be requested by public authorities under the Freedom of Information Act (2000). If necessary, NDAs can include legal terms which exclude these requests
How long do non-disclosure agreements last?
There are no timeframes that state how long an NDA lasts. It depends on what both parties mutually agree to. When an end date hasn’t been set, the agreement remains indefinitely.
Businesses might choose to set one; if the information no longer needs protecting, or the relationship between the parties has dissolved.
What happens if you breach a non-disclosure agreement?
Breaching an NDA leads to serious legal consequences–which all parties should be aware of before signing. Legal breaches include:
- Copyright infringement: Using the information without permission.
- Misappropriation of business secrets: Wrongfully using or sharing a trade secret.
- Conversion: Purposefully interfering with a party’s confidential property.
Breaking a non-disclosure agreement can lead to compensation penalties or further prosecution. And these must be outlined in contracts and policies.
Get expert guidance on non-disclosure agreements with Peninsula
When dealing with NDAs, it’s vital to apply the right legal method throughout. After following proper steps, you’ll be able to present confidentiality requests suitably .
Failing this can lead to hefty penalties and business damages–which can be hard to recover from.
Peninsula offers expert guidance on non-disclosure agreements. Our team offers HR documentation and contract services, which can guide you through legal rules for these contracts.
And our 24/7 HR advice is available 365 days a year; with multi-lingual support and fully trained counsellors ready to help.
Want to find out more? Book a free consultation with one of our HR consultants. Call 0800 028 2420