What is a confidentiality agreement?

A confidentiality agreement, also known as a non-disclosure agreement (NDA), is a binding contract between two parties that holds each side accountable for protecting private information. A confidentiality agreement can function as a mutual agreement between, for example, two business partners, or a client and a vendor. Employers often implement it as a one-way agreement with their employees to ensure that they refrain from disclosing vital information during and after employment.

Why should HR leaders care about a confidentiality agreement?

Trusting employees with invaluable information places the organization in a vulnerable position. Yet with a thorough and reasonable confidentiality agreement, the employer can protect against potential employee betrayal. A good confidentiality agreement:

  • Prevents employees from breaching the contract
  • Clarifies employee obligations 
  • Strengthens the employer-employee relationship
  • Enables companies to maintain their competitive edge in the market
  • Avoids risking enormous financial loss

What can HR leaders do to ensure an effective confidentiality agreement?

HR leaders can implement these tips when preparing to draft a confidentiality agreement:

  • Determine the objectives.  Executives should identify the specific kinds of information they want to safeguard. For instance, does the employer only want to insulate trade secrets? Or information regarding internal company processes and customer information as well? 
  • Consult a lawyer. HR leaders should refer to an attorney to write or review the contract. The specialist should check that the confidentiality agreement is reasonable, effectively protective, and adheres to state and federal regulations.
  • Specify the conditions and the timeline. A well-written contract that clearly explains the conditions legally buffers the company against the misuse of their confidential information. Additionally, by including the time span of the agreement, employees will know how many years they should adhere to it. Depending on the circumstances, it can last from one to five years since the termination of employment. 
  • Educate employees. HR leaders must emphasize the importance of protecting secret information to employees throughout their employment lifecycle. Specifically, during the exit interview, HR leaders should remind employees of their commitment to maintaining confidentiality, helping reduce intentional or unintentional information leaks. 
  • Clarify government guidelines. If the employee and the employer reside in different countries, the contract must include the relevant governmental laws. England and Wales, for example, adhere to differing judicial regulations than Scotland.   
  • Sign the contract immediately. HR leaders can introduce the confidentiality agreement during the hiring meeting. Signing this document encourages new hires to respect the company’s bylaws from their first moments on the team. 

How can an effectively implemented confidentiality agreement improve company culture?

A confidentiality agreement enables employees to assume collective responsibility for the company’s overall wellbeing and success. Laying out the rules for employees helps them cultivate respect for company protocols, nurturing a culture of upstanding, accountable individuals.