If there is one thing that is valued more than ever today, it is the care that is taken with data and information. And this also applies to what happens within a company: that nothing sensitive of what happens there is shared or disseminated outside the boundaries of the organisation. To ensure that this is respected, there are so-called confidentiality agreements.
If you want to know more, in this article we will explain what a confidentiality agreement is, its types of implications and its importance for companies.
What is a confidentiality agreement
A Non-Disclosure Agreement (NDA) is a document that sets out a series of conditions with the aim of ensuring that information shared, for example private or sensitive information, between the parties is not communicated or disclosed to a third party. This is aimed at safeguarding company information and ensuring that it remains secure, which is essential for an organisation.
Types of NDA
There is not just one confidentiality or non-disclosure agreement, but several, and these depend on their type, industry and subject matter. Here are some of them:
Confidentiality agreement for employees. This type regulates the use that the company’s employees must make of the confidential information they receive from the work they perform in and for the company. This regulates that employees do not use trade secrets in a way that harms the organisation of which they are a part.
Confidentiality agreement between companies. This agreement is often used
in negotiations and discussions between companies when agreeing distribution contracts, mergers between companies, collaborative projects or franchises. Here the parties are obliged to maintain confidentiality during the negotiation process and also for a period of time afterwards, as set out in the contract.
Precedent confidentiality agreement. This is used for mergers and acquisitions. For example, if one organisation wants to buy another, it will need access to its books and assets. In this context, such an agreement can protect sensitive information from being disclosed.
Confidentiality agreement for business idea or product. This agreement is used when a person or company has invented something new (product, machine, device, service, etc.) and contacts another company to evaluate it and see if a partnership is possible, for example. During this evaluation it is necessary to protect the information that has been handed over.
What is a confidentiality agreement for?
Confidentiality agreements are primarily useful because they protect sensitive or private information that should not be disclosed. This is not ” a verbal agreement”, but establishes the legal basis for protecting confidential information from unauthorised disclosure. It commits the parties involved not to use this information for their own benefit or to disclose it to third parties, and ensures that it is kept secret and only used for the purposes for which it was agreed.
You should know that confidentiality agreements in Mexico are concluded in accordance with the principles of Article 16 of the Constitution, which is established in the Federal Law on the Protection of Personal Data Held by Private Parties and the current legislation on contract law.
For its part, the National Institute for Transparency, Access to Information and Protection of Personal Data (INAI) is the body in charge of establishing fines in case of breach of confidentiality contracts, in accordance with the applicable law in the penal code.
When to use an NDA
A confidentiality agreement generally applies when working with sensitive or confidential information which, if disclosed, may affect one or more of the parties involved. Therefore, such an agreement can be used in these cases, for example:
- When using personal and sensitive information from a device. For example, personal information or biometrically collected data.
- Whether team members have access to sensitive company information.
- When members of the company have access to important organisational decisions, strategies, road maps or ways of working that, if shared, would affect the company.
What an NDA protects
As mentioned above, the main purpose of a confidentiality agreement or NDA is to protect confidential information and to safeguard the interests of the parties involved. Here are some examples of what it protects:
- Trade secrets
- Intellectual property rights
- Research and development
- Business processes
- Commercial information
- Personal customer data
- Technical information
- Marketing strategies
- Financial information
- Business-to-business relationship
- Proprietary software
- Copyright
- Other
How to make a confidentiality agreement
While it is advisable to review a confidentiality agreement with relevant areas, these should have some important points such as:
- Define the parties and the objective of the agreement that brings them together and the concepts to be protected.
- The limits within which the information can be used must be established and the uses to which this type of content can be put.
- Space should be provided for the signatures of the parties.
What is contained in a confidentiality agreement
The content of a confidentiality agreement varies from case to case and is linked, in turn, to how to make an NDA (see above). Here we break down some general points that should be considered:
- Stipulate from the outset the parties involved.
- The confidential information to be safeguarded should be clearly and unambiguously defined.
- State the purpose of disclosure, i.e. it should contain a section explaining why confidential information is being communicated to the signing party.
- Obligations of the party receiving information, i.e. what can and cannot be done with the data received.
- The duration of the agreement
- Immunity notice exempting employees from liability for disclosing secret information in certain circumstances, such as a court order, legal obligation or detection of a rights violation.
- Penalties or sanctions in case of non-compliance with the agreement.
Benefits of a confidentiality agreement for employers
The main benefit will undoubtedly be the security of a company’s information, that cherished asset that cannot be breached if the interests of an organisation are to be protected. By being clear that employees or even former employees, for example, will not leak confidential information, the company will remain protected.
In turn, the use of NDA translates into greater seriousness and commitment on the part of employees, who know that they are in possession of important information that must be taken care of and not disclosed. In addition, if someone violates the agreement, and since this agreement has already been signed, the consequences are clear if a breach of the agreement is committed.
If your organisation needs to implement confidentiality agreements, Kilpatrick can find the right talent for your company to correctly implement this type of agreement and protect one of your most valuable assets: information.