5 Reasons Why You Need an NDA (Non-Disclosure Agreement)
How to write a Non-Disclosure Agreement (NDA) — otherwise known as a Confidential Disclosure Agreement (CDA) or Confidentiality Agreement (CA) — and how it protects you
Do you know why your freelancers should sign a Non-Disclosure Agreement (NDA)? A significant concern for many business leaders is protecting the confidentiality and security of any information shared and the project work itself. How can you be sure you can trust the person you have hired? Just as businesses rely on non-disclosure agreements with employees, they must also use these agreements with their freelancers to protect company information.
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What Is an NDA (Non-Disclosure Agreement)?
Non-Disclosure Agreements, or NDAs for short, are legally binding contracts that protect confidential information. An NDA also can be referred to as a Confidential Disclosure Agreement or Confidentiality Agreement (CA).
This document allows you to outline what information may be shared between you and your freelancer and what cannot be discussed or shared with other parties. Providing clarity around confidential information helps you and your freelancer avoid misunderstandings.
What Do You Need in Your Non-Disclosure Agreement (NDA)?
It is imperative that you clearly state what is okay and what is not in your Non-Disclosure Agreement (NDA). Most importantly, you want to make sure you have the following 4 critical components included.
1. Identify the participants.
The name of each party agreeing to the NDA must be clearly listed. You must list your company’s name and the freelancer’s name/agency correctly. Otherwise, the NDA may not be able to be enforced.
2. Explain the purpose.
Detail the specific use that confidential information will be shared for – in other words, identify the project(s) your freelancer will be working on related to this NDA.
3. List all the confidential information.
List exactly what you want to be kept confidential in your Non-Disclosure Agreement (NDA). Be specific. Listing “my business” is too vague – you must be as specific as possible in detailing the scope of the protected information. What information about your business do you want the freelancer to keep confidential? How restrictive are the confidentiality requirements? For example, is the restriction only on sharing documents or work products, or does it also include any discussions?
4. Identify the terms.
Specify all the terms of the NDA. How long should the information be kept confidential? (Make sure to set time restrictions to a reasonable period.) Do you own the work produced by the freelancer? Will they be able to use it for portfolio purposes? Which state’s or country’s law will apply? These are some of the questions you need to keep in mind.
What Are the Benefits of Having My Freelancer Sign an NDA (Non-Disclosure Agreement)?
As much as we want to believe everyone brings integrity to their work, it is not always the case.
Having your freelancer sign a Non-Disclosure Agreement (NDA) not only increases trust, but it also provides clarity for your freelancer. There are a few other benefits to having a signed NDA, a legally binding agreement.
- A signed Non-Disclosure Agreement (NDA) gives you the freedom to discuss your company’s policies without fear of the freelancer running off to tell a third party. Should something happen, you have documentation and can exercise your legal rights.
- A NDA also provides legal protection after you and your freelancer part ways. The length of time is determined by what you specify in the agreement.
- It is a sign of respect. When your freelancer signs your NDA, it shows that they respect you and your company and that they want to start the business relationship on the right foot.
What if I Don’t Have a Non-Disclosure Agreement (NDA)?
If you do not have a Non-Disclosure Agreement (NDA) in place, you run the risk of exposure of confidential information, which could result in lost money, intellectual property rights, or other impacts on your business. Without an NDA, you may have no legal recourse or option for consequences to be imposed. The freelancer will not have clarity on what information must be protected and how it should be used, both before and after the project is finished.
Download Liquid’s Independent Contractor Agreement Checklist as a handy reference guide.
Contract Smartly With an NDA (Non-Disclosure Agreement)
Overall, there are 5 reasons to have your freelancer sign an NDA (Non-Disclosure Agreement) / CDA (Confidential Disclosure Agreement) / or CA (Confidentiality Agreement).
- It ensures clarity on what information should be kept confidential.
- It provides boundaries. Who owns what? What can be shared? For how long must the information be confidential?
- You have legal protection and options to enforce the protection of your company’s information.
- Preventing intentional or unintentional disclosure of confidential information protects your company from negative business impacts.
- It establishes trust.
Even with an executed Non-Disclosure Agreement (NDA), we still recommend you provide sensitive information gradually, clearly marking all such information ‘Confidential’. Build up your work relationship first.
Onboarding your freelancer can be a bit daunting, especially when legal documents are involved. Liquid users can use our pre-existing templates for freelance contractor agreements and NDAs or integrate your own custom agreements. Liquid makes it easy to quickly hire and onboard freelancers while protecting your confidential information.
Ready to get started with streamlining your onboarding process with built-in templates for NDAs? Try Liquid today!
Note, we are not providing legal, tax or payroll advice. Please consult your legal, tax and payroll professionals. These are simply to serve as guidelines based on our own experiences.
Category: Freelancer Management
Updated: July 13, 2021
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.