A definitive guide on Non-Disclosure Agreements (NDAs) for independent contractors and freelancer

For freelancers and independent contractors, working with a contract is recommendable in nearly every situation – it always protects both sides from a range of potential risks that may come about. However, legal language is usually quite scary, and signing an agreement can feel like joining a contest which you are unfamiliar with.

In this post, we will explore one of the common types of agreements – the Non-Disclosure Agreement (NDA).

What is a non disclosure agreement?

For starters, an NDA, also sometimes known as a confidentiality agreement, or secrecy agreement, is basically a legal pact that obligates to privacy and forces those who consent to keep any sensitive information secret.

Why does the NDA exist?

Like we have mentioned above, an NDA exists to protect clients’ information and the way they do business. This might refer to an idea, database, content, concept, or invention containing confidential information, or even a process by which your client runs their business.

Since freelancers and independent contractors usually work with various clients concurrently, it is critical for clients to protect data or information about their organization that they consider sensitive.

A non-disclosure agreement also includes those that work for you

If you subcontract any part of your work, and those subcontractors are privy to the information contained in the NDA, it is advisable also for them to be included in the agreement.

An example of this can be the web copywriter that uses another person to perform keyword research and SEO optimization. If the services entail accessing the information covered by the NDA, that person has to sign the agreement, too.

Types and examples of sensitive information

Any sensitive or confidential information demands the use of a non disclosure agreement form. For instance, classified information relating to government contracts may compel you to sign an NDA. A business may wish to protect its catalog of client emails from potential competitors. Other types of confidential information might include the following.

• Company financial records
• Ideas for a new invention
• Schematics for a yet-to-be-released app
• Blueprints
• Manufacturing or engineering processes
• Ideas for a new marketing campaign
• Vendor lists

Types of NDAs

1. Unilateral NDA

This is a one-way NDA which entails two parties, but only one party divulges the information to another one. Usually, the person or organization revealing the information is referred to as the disclosing party while the person being contracting is called the receiving party.

When it comes to unilateral NDA, only the receiving party swears to protect the information and keep it confidential. For example, an advertiser who is an independent contractor promises not to divulge trade secrets and marketing strategies of the organization they are entering a contract with.

2. Bilateral or Mutual Non-disclosure Agreement

Mutual Non-Disclosure Agreement is signed by two parties that wish to reciprocate confidentiality. Also called bilateral NDA, mutual NDA is generally signed when two parties share sensitive information amongst themselves. For instance, a company can share with independent contractor sensitive information such as the financial status of the company, upcoming projects, growth reports, etc.

3. Multilateral NDA

A multilateral non disclosure agreement comprises of three or more parties. Here, at least one of the parties divulges confidential information to the other signatories. This type of NDA abolishes the need for separate or bilateral or unilateral NDAs.

Main elements of a non disclosure agreement

There are several issues that a standard NDA should entail. First, it should clearly define the sensitive information being protected. Often, this part is quite vague because explicitly revealing secrets beats the purpose and logic of the whole thing.

Exclusions are should also be included in an NDA. Exclusions spell out situations where it would be too burdensome or unfair for the receiving party to keep the information classified. The exclusions may cover information that is:

• Already privy to the receiving party
• Independently developed by the receiving party without reference to the disclosing party
• Already in the public domain

Most NDAs have a time frame. The information is rarely protected forever. However, depending on the urgency of the information involved, the validity period can vary from weeks, months to years. For instance, until a product is released to the market and the info about it is publicized.

NDAs will also specify the people who are made privy to the sensitive information and required to keep it confidential. Meaning, if you are partnering with any subcontractor or getting help on an assignment, the disclosing party must be notified so that the additional parties can be included in the agreement.

Last but not least, there should be a resolution. The non disclosure contract should spell out what happens when there is a breach of the agreement.

Benefits of signing a non disclosure agreement

You already know that that the biggest reason for signing an NDA is protecting confidential information. No organization wants its concept or brand new marketing ideas leaked prematurely. Keeping such matters, secretive is imperative, and signing a nondisclosure contract serves as an assurance for your client.

Most importantly, it allows clients or the disclosing party to feel more confident about divulging information, which may, in many instances, help an independent contractor to carry out a project successfully.

Downsides of NDAs

Sometimes non disclosure contracts can be tricky. For instance, some clients will try to control the information you are permitted to share about the projects. Well, this is okay but has its drawbacks.

Not being in a position to slip in the project in your C.V, for instance, is something very disadvantageous to your career. It leaves an employment gap on your resume, which might seem like a red flag to the client hiring you.

So, what are your options? First, it is good to note; not all clients take an employment gap as a “bad thing.” Secondly, you can use a well-managed approach to turn the gap to your advantage. But don’t lie.

Alternatively, you can negotiate with your past clients to list the projects vaguely on your resume. This can be done without mentioning their organization if that is what they are protecting.

An NDA can also limit the use of anything learned while working on the project. Again, that is tricky; because it is almost impracticable to employ such a mental barrier. More so, it means that you are limited on building up your experience. You must reinvent the wheel anytime you want to work on a similar assignment, which is quite illogical. This is when you may wish to renegotiate that section of the agreement or even step away if the client refuses to change it.

Lastly, enforcing an NDA can be quite complicated and costly when a breach occurs. Therefore, you may find clients still limiting the information they may wish to divulge to the freelancers. Keep in mind, as a freelancer, the more privy you are to some information, the easier your work becomes.

Consider this before signing a non disclosure agreement

• The use of vague or broad language – When reviewing an NDA, ensure the definitions of confidential and proprietary information are clearly defined. Be skeptical of vague and broad language that aims to unfairly limit your ability to divulge information.
• Understand the Contract’s scope – Consider what the non disclosure agreement form is asking you not to divulge and for how long. What kind of information are you restricted from divulging? What should you do to ensure the information remains classified? How long are you expected to keep the information confidential?
• Understand the repercussions of breaching it – Be cautious of unusually unfair or extreme penalties for breaching the NDA contract. Evaluate the proportionality of the penalty to the breach, and if the penalty far overshadows the breach, desist from signing. Also, make sure the contract isn’t immensely in favor of one party. Avoid one that imposes blame on you for violations made by third parties, including your associates, without a comparable provision to balance.
• Is the NDA negotiable? – Henry clay (1777 – 1852), former speaker of the House once infamously said, “A good compromise is when all parties are dissatisfied.” Never hesitate to ask the client to alter or modify the terms on the contract if you think something is unwarranted. With any standard contract, there must be a reasonable balance between parties. Spell out any concerns and ask for clarifications about the terms or provisions of the agreement.
• Follow your instincts – If something in the non disclosure agreement form seems distrustful, it probably is. Hiring an attorney to review your NDA now may appear like an inconvenience; however, it is a fraction of the costs you could incur late on down the road. Also, like we already mentioned, if the NDA contract seems overly oppressive, there is nothing wrong with walking away.

Using electronic signatures in non-disclosure contracts

Thanks to the ESIGN act, e-signatures are accepted in NDA contracts by the majority of countries in the world. Usually, valid electronic signatures are deemed to carry the same legal weight as typical wet-ink signatures.

However, for any non disclosure agreement form to be legitimate, the parties involved must have had an intention to sign it. Also, the parties must have consented to sign electronically. The ESIGN act further ensures the validity of NDA forms signed electronically, as long as they genuinely reflect the agreement and can be referenced whenever the need arises. Lastly, the system you use to sign online needs to keep an associated record, which proves the process the NDA form, was created.

Main benefits of using e-signatures in NDA forms

Speed – The era of waiting for NDA documents to be sent physically is now gone. NDA documents can now be written, completed, and signed online by all the relevant parties in real-time, regardless of where they reside.

Security – There is no safe way of avoiding NDA documents to be intercepted, destroyed, or tampered with while on transit than using electronic NDA forms.

Imposter prevention – There is a minimized probability of signature forgery as no one can submit an electronic NDA contract fallaciously claiming the signatory duly executed it.

Non-repudiation – An NDA signed electronically can digitally identify the parties that executed the signature, and that cannot be denied later.

Costs – The cost of sending NDA contracts via courier or postal services is incredibly high as compared to the electronically signed NDA documents.

Authenticity – An electronically signed NDA form can be used in auditing or even produced in court as evidence just as any other signed paper contract since its legitimacy cannot be questioned, thanks to its high level of security.

Signing non disclosure agreement form with eSign Genie

Currently, one of the most popular e-signature platforms is eSign Genie. Employing the service of eSign Genie over the traditional wet ink signatures when signing NDA documents comes with many advantages:

• It lets the disclosing party ascertain when a freelancer has opened the NDA contract and when he/she appended his/her signature.
• eSign Genie provides an auditing trail, which can be used to guarantee the confidentiality of all NDA-related transactions made.
• eSign Genie’s electronic signatures are securely kept via the Public Key Infrastructure (PKI).
• All signatures from eSign Genie are legally acceptable and may be produced in court as evidence.
• eSign Genie can be integrated with 3rd party applications such as Google Drive, ZipForms, OneDrive, and Dropbox for additional storage of contracts.
• eSign Genie has a template library with pre-designed non-disclosure agreement templates to pick from, allowing users to get started quickly. Alternatively, clients can create their own reusable non disclosure agreement template to reduce the setup time.

Have you broken your NDA, now what?

Since an NDA is a legal agreement, it provides legal steps your client may follow if you breach it. In other words, the ramifications or consequences of breaking a non disclosure contract can be severe.

If your client finds out that you have leaked sensitive information in violation of the agreement, make no mistake: your work is likely at risk. Your client may have to opt for termination of your contract as one of the consequences of violation.

Also, your client may opt to sue you for monetary damages he/she has incurred as a result of the violation. However, courts tend to view these kinds of provisions skeptically and hold them to high standards. As such, a judge may opt not to implement a liquidated damages clause and, alternatively, award actual damages.

Common types of lawsuits associated with NDA breaches include those that allege misappropriation of trade secrets, intellectual property infringement or a breach of fiduciary duty.

Finally, keep in mind: even accidental or inadvertent breaches of NDA contracts can open you up for legal responsibility. That is, if you mismanage sensitive information without intending to disclose secrets – but still the information leaks because of your negligence – you also may be breaching an NDA.

As you can see, violating an NDA may have severe ramifications; therefore, it is vital that you fully comprehend the terms of the document. Exactly, know what is covered by the contract, and also what can ensue if you violate the agreement.

As with any legal agreement, keenly read the fine print and understand what you are consenting to before you append your signature.

When it is acceptable to violate an NDA

Are all non-disclosure contracts legal? Can you even break a non-disclosure contract? Not all NDA documents are legal. First, it is worth noting that when an NDA contract is excessively broad, it is next to impractical for a court of law to enforce it.

For instance, what would intellectual property imply? Does it refer to a copyright, a patent, a trademark, an idea, or a blog post? The list can go on. Actually, every state has its own unique legislation on how this information must be defined.

From a technical viewpoint, though, you can break a non-disclosure contract nearly anytime you want. But that doesn’t justify you to do it.

But, typically, there are times when an NDA is deemed null or void. One of the things that make an NDA unacceptable is when it doesn’t conform to the specified laws. If you are sued for breaking the contract, the fact that the contract didn’t follow state laws or was overly broad can become your defense.

NDA contracts may also be broken if the information therein was conveyed to the receiver by a 3rd party not included in the agreement. Also, if the information was already available to the public at the time the contract was being signed, then that NDA can be termed as null or void. Lastly, there are NDA agreements that cover illegal acts or violate public decency laws.

In conclusion

Signing agreements should never be done in a rush. Freelancers and independent contractors should cautiously review any non-disclosure agreement form they are presented with and seek advice from an attorney if they feel uncertain about what it covers. Also, gone are the days when NDAs were only signed physically. Nowadays, everything is going digital, and so is contract-signing. All said and done, choosing whether or not to sign non-disclosure forms will get simpler with time as you resolve what you can consider and what you may rather not do.