Non-Disclosure Agreement (Confidentiality Agreement)

Definition

The term non-disclosure agreement is used to describe a contract between two parties that outlines how confidential materials or information may be shared with others.  While non-disclosure agreements oftentimes involve non-employees, companies will sometimes ask employees to sign these agreements when they are first hired.

Explanation

Also known as a confidentiality agreement (CA), a non-disclosure agreement (NDA) is a legal contract between two or more parties that outlines how proprietary information may be shared.  Confidentiality agreements usually involve employees and their employers, while non-disclosure agreements normally involve a corporation and non-employees.

The purpose of these agreements is to protect the company's proprietary, non-public information from disclosure to other parties.  NDAs are usually signed when one party has a need to share this information with another party for a specific purpose.  For example, one company may hire another to help them improve a process that involves trade secrets.

The non-disclosure agreement will typically address a number of items:

• Parties:  includes those parties covered by the agreement, which can be representatives of a corporation, non-employees, as well as employees.
• Identification:  including the confidential information that may be shared or generated during the agreement.  This may also include labeling of materials with terms such as proprietary, confidential, or restricted.
• Disclosure Period:  the term over which disclosure is prohibited, typically used when certain confidential information will eventually be publicly disclosed.
• Exchange of Information:  includes how confidential information may be transmitted or reproduced.  For example, the NDA may prohibit emailing of documents unless the information is encrypted or password protected.
• Exclusions:  identifies information that is not specifically covered by the agreement.
• Protection of Information:  outlines how confidential materials may be stored.  For example, physical documents may need to be kept in locked cabinets and computer hard drives may need to be encrypted.

Related Terms

applicant pool, pre-employment drug testing, workplace drug testing, employment background check, pre-employment test, employee eligibility form, nonsolicitation agreement, non-compete-agreement