A confidentiality agreement, also known as a non-disclosure agreement “NDA” to some, is necessary to keep secrets within a business from leaking to their competitors or from the public. This is done to keep secret, any information that could cause the company to lose money. If the company does anything illegal or can potentially cause harm to anyone, then the person who signed the NDA still has cause to take the matter to the proper authorities. However, many NDA’s will keep those people who are privy to the information from intentionally leaking new designs or scripts to the public where a competitor can beat them to market.
When drafting a confidentiality agreement, there are some basic points you need to cover and we have conveniently listed them here:
- Hire a contract attorney to help draft or at least review the proposed document. There could be clauses that are extreme or invalid. Plus, an experienced attorney is the best way to ensure you have all the practical points covered.
- Define what “confidential information” is to the reader. Some companies or bosses may want to be incredibly strict with this, such as, not divulging the type of coffee drinks that the boss orders. However, in most cases, this applies to documents that would contain secret information, for eyes within the company only. The goal is to list these items clearly and ahead of time so there is no confusion later.
- Establish who owns the confidential information. This will most likely be the company or parent company but state that clearly. For example, “…is the property of X and Y, LLC”
- Explain the purpose of the agreement. Let the person reading and signing the document why this information needs to be kept secret.
- Let the reader know examples of information that is not part of the agreement. This can include anything that is already in the public domain.
- Specify how the confidential information should be used or destroyed. If you allow an employee to take a prototype home with them, state when or if they should return it or if it is okay to destroy it using a specific method. If the prototype is a type of food item, then state that it must be consumed on the premises of the workplace or whether or not it can be taken home.
- Provide the length of time the agreement can be reviewed and when it must be signed and returned. Let the person know if they can keep a copy for their own records or not. Also, how long the agreement is valid for.
- Explain and list the punishments if the contract is violated either intentionally or accidentally.
- Add in standard contract provisions. This is the small but unique details an attorney can offer with ease. There are templates you could also purchase but keeping only the exact paragraphs that apply are the better way to go. An attorney will know what additional paragraphs you should include making sure that it is a binding agreement.
- Offer an incentive for signing. This could be the job itself or the privilege to view the confidential information if the agreement precedes the events. If you have an employee who is asked to sign a confidentiality agreement upon exiting the company, then offer a larger severance payment. Confidentiality agreements that do not contain some form of an incentive, can be argued as unenforceable under the eyes of the law.
If your NDA is legally binding then it can be enforced by the courts to prevent the person from leaking the information or demand financial compensation from them if it has already been violated. This might seem like a lot of work to a small start-up business but a good attorney can whip a valid agreement up in no time flat.