Importance of Corporate Non-Disclosures in 2018

Your proprietary knowledge and "trade secrets" are among your most valuable assets. And your best hope of protecting them is a corporate non-disclosure agreement.

In the world of business, we're now obsessed with cybersecurity and protecting ourselves against information breaches from faceless attackers. But the people we trust and know can do far more damage.

Let's take a look at exactly what they are, and why you need them in almost any industry.

What is a Corporate Non-Disclosure Agreement?
Simply put, it's an agreement between two parties, either individuals or businesses when one or both parties are privy to sensitive information. Available terms are governed by state law. The corporate non-disclosure agreement protects the secrecy of that given information and gives you a legal recourse if this information is leaked or breached in any way.

An example of this might be a software company asking the marketing company they are about to hire, to sign a corporate nondisclosure agreement.


In getting to know the product, and the unique selling proposition, that marketing company will likely have access to information that the software company’s competition would love to know.

The NDA protects the software company, so their trade secrets can't be sold or leaked. The marketing company has basically taken a vow of secrecy. There may be different terms used when referencing this agreement:

• Confidentiality agreement (CA)
• Confidential disclosure agreement (CDA)
• Proprietary information agreement (PIA)
• Secrecy agreement (SA)

It's a legal document to guarantee that someone with outside access to sensitive or secret information keeps it that way.

For example, Olympic snowboarder Shaun White made his girlfriend sign one so she wouldn't tell anyone the tricks he was working on. His career and brand hinged on keeping this information away from his competition. Was it unusual? Yes. Did it make perfect business sense? Also, yes.

When Would I Need an NDA?
The most common usage would be with your employees. Particularly if you're in a hyper-competitive market. It's not uncommon for an HR professional to have the onboarding process involve a new hire sign a corporate non-disclosure agreement.

Clearly, in working for you they are going to have access to a lot of proprietary or sensitive information. You need to make sure they are not leaking it, selling it, or sharing it in any way. The legal ramifications are severe enough to even keep employees from talking about sensitive work information with family, friends or their spouse.

Subcontractors
You also want to protect yourself against people who may not necessarily work for you full-time. Maybe they are a subcontractor, independent consultant, or freelancer.

To properly do their job, they're going to need access to certain information. Having them sign an NDA guarantees that your information is safe, and you can trust them, legally speaking.

Outside Agencies
We touched on this earlier. We used the marketing example because this is extremely common in that sector. When you're representing a client, you know intimate details about them. You know when their new product is coming out, and the brand-new features it will have because you're the one in charge of promoting it.

This is clearly information that can never fall into your competition's hands. That would cost the client their competitive advantage, and countless dollars.

Mergers and Acquisitions
This is arguably the time when the corporate non-disclosure agreement is most important. During a merger or acquisition, a lot of sensitive information will be shared. And a lot of information that can greatly swing stock prices will also be shared.

To protect the interest of stakeholders, shareholders, and investors, a comprehensive NDA can protect everybody involved and ensure a reasonably seamless transaction.

To learn more, check out our blog HR Due Diligence in Mergers and Acquisitions.

What Does an NDA Include?
Of course, every corporate non-disclosure agreement is different, given the parties involved. But on a surface level, they all need to include:
• All of the parties involved, again this can be a business identity for a single person
• Defined terms of what exactly is confidential. Often times, companies will be vague to try to use a casual approach
• A clear definition of the disclosure. It could be one week, one year, or forever
• The list of excluded materials, such as any materials that are already available or knowledge
• The obligations to keep the information secret or confidential
• Any excludible parties, such as law-enforcement, where there might be permissible disclosure

Mutual or Non-Mutual NDAs
These agreements can come in two different forms. You can sign a mutual, or a non-mutual corporate nondisclosure agreement.

A mutual non-disclosure agreement basically protects the flow of information both ways. Neither party involved can disclose the others information outlined in the agreement. Conversely, a non-mutual NDA will only protect one of the parties' proprietary information.

What are the Legal Repercussions for Breaking an NDA?
There is no singular answer. There is no set fine or jail time. It's all relative to the amount of damage done by the violation and ultimately depends on individual state laws.

For example, the leaking of information for the latest release of iPhones could have massive legal repercussions, because of the billions of dollars in play. The most important thing is to start legal proceedings immediately and seek legal help as soon as possible.

What if I Have Breached an NDA?
Again, you need to seek legal counsel as soon as possible. Your legal team can help defend you and make the case that your circumstances fell outside of the scope of the NDA.

Looking for help when it comes to legal compliance?
Not only do our PEO clients have their payroll, benefits, risk management and human resources taken care of, they gain the collective expertise of our highly trained professionals. From CPAs to attorneys, we are proud to employ experts in a variety of areas to help keep your business proactively protected.

Learn how partnering with a PEO can help you grow and protect your organization.