Contractor Management

A Complete Guide on Independent Contractor Non Disclosure Agreement (NDA)

Mayank Bhutoria
11
min

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While hiring independent contractors is the perfect solution to meet your skill gap, especially during recessions, you must be aware of the associated risks, such as data breaches or sensitive information leakage.

To insulate yourself from these risks, an NDA (Non-disc losure Agreement) plays a vital role in protecting your interest. By signing a contract non-disclosure agreement, the contractor will be aware that disclosing private information is against the terms of the agreement. 

By exploring this blog, you will gain cognizance of the importance of independent contractors' NDAs, how non-disclosure agreements work, and how long is your non-disclosure agreement applicable. So, are you ready to understand ‘what’s a NDA contract?’

What is an Independent contractor non-disclosure agreement?

An independent contractor non-disclosure agreement, also known as a ‘secrecy agreement’ or ‘contractor confidentiality agreement,’ is a legal agreement between an employer and an independent contractor to prevent contractors from sharing confidential information like:

  • Company initiatives
  • Research data
  • Source code
  • Product prototypes
  • Customer lists
  • Operations and processes
  • Trade secrets
  • Intellectual property
  • Financial information
  • Marketing or business plans

NDAs protect the disclosure of sensitive information with an indemnification clause.

Read more: Globalization Partners Alternatives

Do NDAs apply to independent contractors?

Yes, independent contractors must comply with the terms of non-disclosure agreements. If a contractor shares confidential information with third parties without permission, an indemnification clause is triggered, leading to hefty fines and penalties.

Why is an independent contractor NDA essential?

Here are the key advantages of signing an independent contractor non-disclosure agreement.

1. Protect Intellectual Property:

An independent contractor non-disclosure agreement ensures that your intellectual properties, like customer details, innovative ideas, trade secrets, etc., will remain confidential, preventing any unauthorized use or disclosure.

2. Build Trust:

An NDA builds trust between a client and an independent contractor by allowing the contractor to declare a commitment to secrecy and maintain integrity formally.

3. Maintain a Competitive Edge:

Signing an NDA ensures that the confidential information you share with your independent contractor remains exclusive to your organization. It safeguards crucial business information from your competitors.

4. Legal Recourse:

In addition to defining expectations, an NDA is a way of legal protection against unauthorized beaches. An NDA provides a legal framework for recourse in case of a breach. This could include pursuing any further required legal action, asking for compensation, or getting an injunction to stop future disclosure.

What if the independent contractor breaches the non-disclosure agreement?

If an independent contractor violates an NDA, you must immediately prevent further damage to your business. The following options will help you do the same.

1. Issue a cease and desist letter

First, you must issue a cease and desist letter, formally asking the contractor to stop any actions violating the NDA.

In case of a breach, you must request a court-issued injunction. An injunction is meant to stop the contractor from further utilizing or revealing confidential information after the initial breach. 

2. Terminate the Contract:

In case of violation of an NDA, you always have the right to terminate the contract

 with the independent contractor. Termination may be immediate or subject to a notice period (as specified in the agreement).

3. Take Legal Action:

If the above-mentioned methods do not work, take legal action against the contractor for breach of contract. Apart from injunction relief, you can file a lawsuit for monetary compensation.

If the breach causes financial harm, you can ask the court to order the contractor to pay for the losses. If your NDA permits, you can ask your contractor to compensate for your legal fees and other expenses.

Read more: Guide to Contractor Onboarding

What should you include in an independent contractor NDA?

If you’re drafting an independent contractor NDA for the first time and unsure where to begin, here are some key pointers to help you get started. 

1. Identification of parties:

Your contract must contain the names of the parties involved (your company name and the contractor’s name) in it. 

If the independent contractor plans to hire subcontractors, then the independent contractor must inform you and include the names of sub-contractors in the NDA.

2. Definition of confidential information:

In an independent contractors' NDA, you must clearly define confidential information. List everything you need to share with your contractor, such as trade secrets, company plans, financial data, exclusive technology, etc.

3. Obligations of the contractor:

Clearly outline the contractor's responsibilities when it comes to sensitive information. Clearly mention that they must not disclose, duplicate, or use the information for any purpose other than the contracted work.

4. Duration of confidentiality:

You must mention the duration for which the confidentiality obligations will be in effect. This may be throughout the whole term of the agreement or can be extended for some time after the completion of the project.

5. Permitted disclosures:

You must specify exceptional cases (if any) that allow the contractor to disclose confidential information.

6. Consequences of breach:

Give a clear description of the consequences of breaking the NDA, such as possible legal actions, penalties, etc.

How to write a non-disclosure agreement for independent contractors?

Seek legal advice

Before drafting an NDA, it is important to take legal advice. You can consult a legal professional to ensure the agreement is enforceable and compliant with relevant laws.

Clearly define confidential information

You must be careful and accurate when determining what is and is not considered sensitive information. Ambiguity can lead to misunderstandings and confusion.

Exclusions and legal disclosures

Make clear if it is okay to share confidential information in certain situations, such as legal requirements. This will help to avoid confusion and keep your agreement in line with legal rules.

Ownership and injunctive relief

You need to clearly mention the ownership of confidential information and incorporate an Injunctive Relief clause. This clause highlights the long-term harm that might result from unauthorized disclosure and permits prompt judicial action to stop more harm.

Include governing law and jurisdiction

You must mention the governing law and jurisdiction under which the NDA is created. This ensures that any legal issues related to the contract are resolved in a predetermined jurisdiction.

Consideration

Make sure both sides get something valuable in return for keeping secrets. This makes the agreement legally strong and fair.

Review and update

Review your agreement at regular intervals and update it when needed. Things can change in business or the law. So, it is important to keep your NDA up-to-date, which helps it stay useful and right for both sides.

Conclusion

An NDA is an indispensable tool for protecting sensitive information and promoting a trustworthy collaboration between clients and contractors. It helps to mitigate the risks associated with the disclosure of confidential information. For careful drafting, legal guidance, and managing NDAs, consider partnering with Gloroots, a trusted global employment solution. It can create and manage NDAs on behalf of your independent contractors. It helps you to generate a contractor confidentiality agreement, get it signed, and store it along with all your other required compliance documents.

Book a demo today to see Gloroots in action.

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