In today's business world, confidentiality and non-disclosure agreements are becoming increasingly important for businesses looking to protect themselves from damaging leaks. Most employee contracts will contain some kind of confidentiality agreement as standard, but these kinds of agreements are very important if you share information with another company for any reason, or if you hire outside contractors to work for your business. You may soon discover that a reliable confidentiality agreement could be one of the most valuable business documents that you have!
Many firms underestimate the damage that can be done by unauthorised disclosures of information, and it can take just one unscrupulous or careless individual to do thousands of pounds worth of damage to your company.
Why do I need a non-disclosure agreement?
Potentially damaging information that can be leaked from a company includes:
- Business documents, plans and strategies
- Passwords and other access information
- Technical diagrams, company software programs, and so on
- Research results
- Financial information
- Legal documents
- Confidential correspondence
- Personal information of employees
Depending on the nature of the leak, improper disclosure of one of the above could cause you a minor PR problem, sabotage an entire project or even irreparably damage your business. If you haven't done so already, you need to sit down and consider how your internal company information could be used against you, and what data needs to be covered by your company's non-disclosure agreement.
How do I implement an agreement?
A non-disclosure agreement can be implemented as a separate document or as part of an employee contract. In either case, it is worth making sure that the agreement is correctly worded and legally binding, either by consulting a lawyer or by using a legal document template to draw up the agreement.
Some of the things that need to be included or defined in the agreement are:
- The owner of the information (typically the company or owner of the company) and the receiver of the information (the contractor or outside company that will be working with you)
- Definitions of the terms used in the agreement (for example, “information", “disclosure", “public access", “intellectual property" and so on)
- Reasons why the non-disclosure agreement is necessary
- Definition of what sort of information is covered by the agreement
- Definition of permissible use of the information
- Any exceptions to the agreement
- Any penalties to be imposed if the agreement is breached
What happens if someone breaks one?
Anyone who breaks a non-disclosure agreement leaves themselves vulnerable to legal action, and they may face an injunction, damages and orders to account for profits. If a compensation amount was specified in the agreement this can be requested, but note that different countries have different regulations about how much you are allowed to claim, and a judge is likely to overrule any excessive compensation demands. Essentially, a non-disclosure agreement acts as an effective deterrent against a breach of confidentiality, and puts you in a strong legal position if a breach does occur.
What exceptions are there?
Non-disclosure agreements may protect you from careless or unscrupulous companies and contractors, but they won't protect you from the law - they can be overruled legally if there is a legitimate reason to do so, for example as part of a court case. They can also be rendered invalid if they are incorrectly worded, so make sure that you get proper legal documents that clearly define the terms and conditions of the agreement.
Iain Mackintosh is the managing director of Simply-Docs. The firm provides over 1100 legal documents covering all aspects of business from holiday entitlement to non-disclosure agreements. By providing these legal documents (with content provided by leading commercial lawyers, HR and health & safety consultants) at an affordable price, the company intends to help small businesses avoid costly breaches of regulation and legal action.