Please note: This post is for informational purposes only and is not legal advice. If you need advice about entering into an NDA or any other contractual agreement, you should consult an attorney licensed in your jurisdiction.
Credibility, consistency, and quality of work are among the top fundamental needs for becoming and maintaining your status as a successful independent consultant. Another important requirement is the ability to manage client confidentiality with care and discretion.
One way businesses can ensure confidentiality is through a non-disclosure agreement (NDA) or confidentiality agreement. In this post, we’ll delve into the world of NDAs by providing an NDA definition, outlining the purpose these agreements serve, as well as providing you with essential insights on how to navigate client confidentiality needs effectively.
What is a Non-Disclosure Agreement (NDA)?
A non-disclosure agreement, also known as an NDA, is a legally binding contract established between two or more parties that outlines the information they wish to protect to ensure that it will remain confidential. This type of agreement may also be referred to by other names, such as a confidentiality agreement (CA), a confidential disclosure agreement (CDA), or a proprietary information agreement (PIA). Once an NDA is signed, the parties outlined within that agreement legally cannot disclose the specified information detailed to anyone unauthorized to do so.
Understanding the purposes of non-disclosure agreements
NDAs are most commonly used to help safeguard sensitive business, technical, or proprietary information from being disclosed to unauthorized individuals or entities. Their purpose is to:
- Establish expectations and obligations
As an NDA clearly outlines which business information is protected, guidance on how to handle trade secrets, and the consequences for employees or consultants who violate the agreement. - Protect intellectual property
Businesses often rely on their intellectual property as a competitive advantage. NDAs ensure that proprietary information, including business plans, product designs, marketing strategies, or trade secrets, remains confidential and secure from potential competitors. - Facilitate collaborative partnerships
NDAs foster collaboration between parties involved in a project. By clearly defining the scope of confidential information and its permitted uses, consultants can work closely with clients, discuss sensitive matters freely, and propose innovative solutions without the fear of compromising proprietary knowledge.
Three types of NDAs
- Unilateral – Also known as a one-way NDA, unilateral agreements only protect the confidential information of one party. This type of NDA is the most common and most often used when companies need to share confidential information such as trade secrets, business and development plans, pricing data, or technical information with employees, partners, clients, and other stakeholders.
- Bilateral – Also known as mutual NDAs or two-way NDAs, these agreements require both parties to disclose confidential information. Each party can also limit how the other party will use and share the information. These agreements are most common when the parties involved need to exchange a lot of private business information during negotiations, such as during a corporate takeover, joint venture, merger, or acquisition.
- Multilateral – These multiparty agreements are most often utilized in complex, negotiation-heavy deals involving three or more parties where at least one will disclose information to the other parties and require the prohibited information from further disclosure. This agreement can streamline confidentiality needs across multiple parties and avoid the need for separate bilateral or unilateral NDAs across parties.
An NDA, regardless of type, is a critical tool for establishing trust and enabling open and trusted lines of communication.
The DNA of an NDA
NDAs use very specific language to ensure the agreement can be enforceable in court. Before you sign, check to make sure that the non-disclosure agreement clearly defines:
- Proper identification of all parties in the agreement
An NDA should identify the disclosing party (the entity sharing confidential information) and the receiving party (the entity receiving the information). - What is considered confidential information
An NDA should explicitly define the types of information considered confidential, such as proprietary technology, financial data, customer information, marketing plans, or any other information the disclosing party wishes to protect. It is also standard for an NDA to define what is not considered confidential information, such as information that has entered the public domain through a source other than the parties. - Clarity regarding non-disclosure and non-use obligations
An NDA should clearly outline the obligations of the receiving party to maintain confidentiality beyond the agreed-upon project or collaboration. - The duration of the agreement
The NDA should specify how long the receiving party must protect the disclosed information. Some NDAs have a fixed time frame, while others may extend indefinitely. - Requests that are deemed unlawful
An NDA should not request anything illegal from the parties involved. For example, it would be illegal to request for the recipient to engage in withholding information that would be considered a legal duty to report.
Navigating Client Confidentiality Needs
Understand the scope
As a legally binding contract, NDAs can carry serious consequences for employees and consultants who violate the agreement, resulting in a lawsuit. Before signing into an agreement, carefully review the NDA to grasp the breadth of information covered and request clarity on what can be shared, what can’t, and the permissible use of confidential information as needed. Also, sometimes companies include non-confidentiality obligations such as non-solicitation terms in an NDA. These may be appropriate depending on the context, but make sure you understand what you are agreeing to and can maintain those commitments.
Adhere to best practices
Familiarize yourself with best practices in information security, confidentiality, labor compliance, and contracting processes.
Safeguard the data
Take proactive measures to protect client data and confidential information throughout your engagement. Utilizing secure cloud storage and encrypted communication channels can demonstrate your commitment to maintaining the confidentiality of your clients. For BTG guidance on how to reinforce your tech security and find tech support as an independent consultant, visit here.
Share information on a need-to-know basis
Limit access to confidential information only to individuals who require it to help minimize the risk of inadvertent disclosure and ensure that all sensitive information remains within a trusted circle.
Maintain documentation
Keep an updated record of all NDAs signed, noting any instances where confidential information is shared or accessed and terms for the agreement. Maintaining clear documentation helps demonstrate your commitment to client confidentiality and serves as evidence of your adherence to contractual obligations.
The Bottom Line
Client confidentiality is more than a legal requirement; it is the cornerstone of your reputation as a trusted advisor and expert in your field. As an independent consultant, your ability to navigate non-disclosure agreements and confidently protect sensitive information reflects your professional reputation and standards. By protecting confidential information, you position yourself as a reliable and trustworthy consultant, ensuring long-term success and a steady stream of satisfied clients.
With Business Talent Group, talented independent consultants and businesses seeking talent can rest easy with best-in-class information security, confidentiality, labor compliance, and contracting processes that adhere to the strict requirements of leading organizations. Join or learn more about the BTG talent network here.
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