Understanding Non-Disclosure Agreements – A Step by Step Guide

Written by Andrew Johnson, Founder and CEO HRGuide - Thu 10th Oct 2024

Introduction

An employer might use a non-disclosure agreement (NDA) to stop an employee or worker sharing information. A non-disclosure agreement can also be known as a 'confidentiality clause'. It's a written agreement and could be:

  • in an employment contract
  • in a conciliation agreement (COT3) – written up when an agreement is reached through early conciliation
  • in a settlement agreement
  • in a separate, stand-alone document

When a non-disclosure agreement might be used - A non-disclosure agreement might be used during someone's job or after a job ends.

For example, a non-disclosure agreement might be used:

  • when someone starts a new job, to protect company secrets
  • after a dispute which results in someone leaving a job, to keep details confidential

Using a non-disclosure agreement as part of a settlement agreement

An employer and their employee or worker might use a settlement agreement to resolve a dispute at work. In some cases, employers might also ask the employee or worker to sign a non-disclosure agreement to keep certain things about the settlement agreement confidential.

Keeping the details of a settlement agreement confidential

A non-disclosure agreement might be used if the employer or the employee or worker wants to keep confidential:

  • the sum of money agreed in a settlement agreement
  • some or all of the other settlement terms
  • some or all of the circumstances leading to the settlement agreement

This does not stop the employer or the employee or worker from telling others that a settlement agreement has been made.

Keeping the fact a settlement agreement has been made confidential

This is when the employer or the employee or worker wants to keep confidential that a settlement agreement has been made. This might be when only certain people know about the settlement agreement and they do not want others to know.

Other reasons for using a non-disclosure agreement

Non-disclosure agreements might also be used:

  • to keep an organisation's information confidential
  • when an employer needs to protect customer or client identities, intellectual property or other sensitive or important business information
  • to keep certain things the employee knows about the organisation confidential
  • to stop someone making critical or insulting comments – for example about the employer or employee, specific people in the organisation, the service that an employer provides, or their customers and clients
  • to help protect someone if the details of a dispute or dismissal became widely known

For example, a new employee joins a pharmaceutical company. They're asked to consider and agree to a non-disclosure agreement that stops them giving company information to competitors.

When an employer cannot enforce an agreement

A non-disclosure agreement cannot stop anybody:

  • whistleblowing
  • reporting a crime to the police
  • discussing their pay with anyone at work for reasons relating to equal pay

When a non-disclosure agreement should not be used

A non-disclosure agreement should not be used:

  • before seeing if another solution can be used instead
  • when confidentiality is not needed
  • when the need for confidentiality already exists – for example some issues might be already covered by data protection law (UK GDPR)
  • to stop someone reporting discrimination, harassment or sexual harassment
  • to cover up inappropriate behaviour or misconduct, especially if there's a risk of it happening again
  • to avoid addressing disputes or problems
  • to mislead someone
  • if it could cause serious moral or ethical issues
  • if it could cause any other negative outcomes or effects

Having an effective non-disclosure agreement in place with key role holders can protect your businesses information, customer data and intellectual property rights.  

Download our template non-disclosure agreement at www.hrguide.co.uk. 

Download our more detailed step by step HR How to Guide for more detail on contract clauses and non disclosure agreements by subscribing to https://www.hrguide.co.uk/subscribe.php

If our step-by-step HR How to Guide doesn’t give you the support you need, simply call us on our HR Helpline for expert advice.