NDAs – an overview

A non-disclosure agreement (NDA), otherwise known as a Confidentiality Agreement, is a mechanism used, normally in an employment or business situation, to keep confidential information confidential. NDAs can be used in a number of settings and for a number of purposes. The principles, however, are common. One or both parties are obligated not to disclose information that is considered to be confidential.

NDAs can also be incorporated into another document. For example, there may be non-disclosure clauses in an employment contract or a Settlement Agreement in a termination of employment designed to keep company confidential information confidential.

Importantly, NDAs are legally binding agreements to keep information confidential.

There are two types of NDAs:

• Unilateral NDA
• Bilateral or Mutual NDA

Unilateral NDA

A Unilateral NDA imposes restrictions on one party to the agreement to protect the disclosure of confidential information.

Bilateral or Mutual NDA

A bilateral or mutual NDA binds all parties to keep the confidential information confidential.

What types of situations require NDAs?

NDAs can be used in many situations. Some examples of these are as follows:

• In pre-contract or tender negotiations where confidential information must be disclosed to enable the parties to reach agreement as to the terms of a contract. These types of NDAs tend to be mutual NDAs with the terms being binding on both parties.
• In the mergers and acquisitions process where the acquiring company will be asked to sign a confidentiality agreement to prevent it disclosing company confidential information held by the acquisition target.
• In Employment Contracts where the employee has access to secret or confidential company information which gives the employer a competitive advantage.
• Product of scientific development collaborations to preserve the integrity of intellectual property owned by the collaborating parties.
• Settlement Agreements leading to termination of employment to prevent disclosure of confidential company information after the employee leaves the company.

These are examples of where NDAs can be used to protect secret or confidential information.

The structure of NDAs

There are common elements in the structure of NDSs, whether they are incorporated into wider agreements or as a stand-alone agreement. The key elements of NDAs are:

The parties: this will clearly identify the parties to the agreement. It may also include those associated with the parties, such as professional advisers, agents, sub-contractors and employees;

Definitions: the purpose of this it to set out the types of confidential information covered by the NDA and how it is to be managed;

The Obligations: the obligations of the parties regarding the confidential information to keep the information confidential;

Destruction/Return of confidential information: the specifics of how the confidential information is dealt with on termination of the contract;

Exclusions: the exclusion of information which is already or may come into the public domain but not as a result of the actings of the parties;

Duration: there may or may not be a time period during which the NDA will endure;

Remedies for breach: this sets out what happens if there is a breach of the agreement and release of the confidential information.

NDAs and Public Authorities

If you enter into NDAs with public authorities, it is prudent to exclude the operation of the following pieces of legislation:

• The Freedom of Information Act 2000
• the Freedom of Information (Scotland) Act 2002
• the Environmental Information Regulations 2004 (the FOIA)

There is nothing sinister about excluding this legislation from an NDA. It’s simply that there is likely to be company or contractual or know-how information or intellectual property to be disclosed to the public authorities which those contracting with them would wish to keep confidential for commercial reasons.

Are there circumstances where NDAs are unenforceable?

There are certain circumstances, especially in employment situations, where NDAs are unenforceable. These circumstances are:

2. Reporting a Crime to the Police.
3. Discussing pay with work colleagues for reasons relating to equal pay.

Abuse of NDAs

The subject of misuse of NDAs came to the fore when the MeToo movement began in the US and very quickly, women spoke up about being forced to sign NDAs following sexual harassment by Harvey Weinstein. NDAs were used to silence women Weinstein had abused.

In September 2023 the Treasury Select Committee inquiry heard evidence from the Can’t Buy My Silence campaign about NDAs being used to cover up sexism and discrimination in the City of London.

Prior to the General Election in July 2024, the Conservative Government had plans to introduce legislation to outlaw the misuse of NDAs. Due to the General Election, this legislation did not make it to the Statute Book.

Used properly, NDAs respect confidential information

When parties enter into NDAs, they allow the parties access to confidential information for commercial and business reasons. They come with reasonable obligations not to disclose the confidential information to anyone not entitled to see that information. It is only proper that there should be sanctions for those who breach such agreements and NDAs serve that purpose.