Before sharing sensitive information about a company’s operations or products, responsible businesses should take steps to ensure that any information shared with another party is used and handled appropriately.

From guarding against the inappropriate sharing of confidential material to the unethical utilization of that information against the company that shared it, nondisclosure agreements offer useful protections. The terms of an NDA, however, require care when drafting to avoid other problems down the road.

Nondisclosure agreements with employees

One use of NDAs that has led to several concerns about their fairness is with a company’s own employees. Many people do require access to confidential company data in order to do their jobs. However, as the Harvard Business Review points out, some company’s NDAs may be viewed as attempts at preventing employees from reporting unethical or illegal activities. Companies should closely review the language in all NDAs signed by employees to avoid this issue.

Other uses for NDAs

According to Forbes, a nondisclosure agreement may prove beneficial to a company in many situations, including prior to engaging in conversations regarding the sale or merger of the business. Discussions with third parties interested in reselling a company’s products may also logically warrant an NDA prior to commencement.

Terms of an NDA

A nondisclosure agreement should clearly outline what data or knowledge is covered by the contract, how long the contract shall remain in effect for, and the agreed-upon method for resolving any conflicts that may arise. An NDA may bind only one party to maintain confidentiality or it may include provisions for both parties. These are referred to as non-mutual NDAs or mutual NDAs.