Non-disclosure agreement (NDA)

What is an NDA?

An NDA (non-disclosure agreement), also called a confidentiality agreement, is a contract in which one or more parties agree not to share confidential information they receive during a working relationship and to use it only for an agreed purpose. The agreement applies for a set period, and a party that breaches it is liable: it may have to pay damages or a penalty, or lose its job or contract.

NDAs are signed with employees, candidates, contractors, investors and partners. They protect trade secrets, financial data, client lists, code, business plans, intellectual property and personal data.

Types of NDA

What to include in an NDA

• The parties and who discloses and who receives the information.
• A definition of confidential information: what exactly is protected, ideally with examples.
• Exclusions: information that is already public, was known before, was lawfully received from a third party or must be disclosed by law.
• Permitted use: what the receiving party may use the information for.
• Duration: for the working relationship and a set period after it ends.
• Return or destruction of materials when the relationship ends.
• Remedies: damages, penalties, dispute resolution and governing law.

How HR uses NDAs

• Candidates. An NDA is signed before a test task on real company data or before seeing an unreleased product.
• New hires. The agreement is added to the document pack during preboarding, alongside the employment contract.
• Contractors. An NDA is essential for outsourcing and freelancers who get access to systems and data.
• Leavers. During offboarding, HR reminds the employee of ongoing obligations and removes access.

Consequences of breaching an NDA

• Damages and a penalty, if the agreement provides for one.
• Dismissal of an employee or termination of a contractor's agreement.
• Legal action, in which the company can seek an injunction to stop the information being used.
• Reputational damage for both sides.

Limits of NDAs

An NDA cannot be used to hide wrongdoing. In the UK, for example, a confidentiality clause cannot stop a worker from making a protected disclosure under whistleblowing law or reporting a crime to the police, and similar protections exist in the EU and other countries. Clauses that try to silence reports of harassment or whistleblowing are generally unenforceable and create legal and reputational risk for the employer.

In PeopleForce, an NDA can be sent for signature with other documents before day one through preboarding and signed remotely with e-signatures. Signed agreements are stored in the employee profile, in the documents section of Core HR, and access rights control who can view them.