What Is an NDA and Does Your Business Need One?
You may not think that you have any kind of top secret information worth protecting at your business. And maybe you don’t have trade secrets like code for a killer new social network or the recipe for Coca Cola. However, almost every business has some kind of confidential or private information. It could be your customer list, your financial records, or ideas for a new marketing campaign. Or perhaps you simply don’t want a sub-contractor to talk directly with your clients and disclose their role.
A non-disclosure agreement (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.
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:
1. 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 can be 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.
2. 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).
3. Obligations
You may need to define what the contractor can or can’t do with the protected information. In most cases, this is they cannot reveal the 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?
4. What Happens If There’s a Breach
An NDA should always include some kind of provision about what happens in case there’s a breach of the NDA. You may want to specific what kind of damages you’re entitled to.
5. Method of Resolution
The NDA should define how a dispute should be resolved when there’s a breach or disagreement regarding the agreement. Will arbitration be used? If attorneys are used, who is responsible for paying the attorney fees?
There are countless digital templates available to help you craft your own NDA. My advice is to use a template as a starting point that you should review (yes, you actually have to read it…) and make sure it works for your needs. For example, you should personalize the “protected information” section, as well as make sure there’s nothing too onerous for your contractors. For example, some contracts give the business the right to search a contractor’s computer at any point; that might be overkill for you and your workers.
Some sample NDA templates can be found at:
Upcounsel
Keep in mind that an NDA 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. But once an agreement is broken, you will need to decide if it’s going to be worth the time and money to pursue the breach through legal channels.
The bottom line is an NDA is a relatively easy document to produce and should become part of your standard practice when bringing anyone new onboard. However, never rely too heavily on this piece of paper; it’s up to you to use common sense when sharing sensitive details with those around you.
This post originally appeared on Freshbooks.
