Non-Disclosure Agreement (NDA)

A non-disclosure agreement, or NDA, is a legal contract that protects confidential business information from being shared or used improperly by someone who has access to it, whether an employee, contractor, or business partner.

Unlike a non-compete, an NDA doesn't restrict where someone can work afterward. It only restricts what they can do with specific confidential information.

What Should an NDA Typically Include?

• A clear definition of what counts as confidential information, distinct from an employee's general skills and experience
• The obligations of the party receiving that information
• Exceptions, such as information that's already public or independently developed
• The duration of the confidentiality obligation, which can extend beyond employment
• Consequences for a breach, including potential remedies

When Should an Employer Use an NDA?

Is an NDA Enforceable in Every State?

Generally yes, more consistently than non-compete agreements, since NDAs restrict disclosure of specific information rather than someone's ability to work.

Courts still expect the definition of confidential information to be reasonably specific; an NDA written so broadly that it tries to cover basically everything an employee learns on the job can be harder to enforce.

How Should HR Manage NDAs Well?

SHRM recommends pairing NDA execution with a genuine explanation of what's confidential and why, since employees who understand the reasoning are far more likely to actually comply.

Managing signed NDAs inside a single HRIS tied to each employee's record, captured during onboarding, keeps this from becoming a scramble to locate a signed copy months later.

• Have every employee with access to sensitive information sign one during onboarding, not after the fact
• Keep NDA language specific to actual confidential information, not overly broad boilerplate
• Track expiration or ongoing obligations, especially for departing employees
• Remind departing employees of their continuing NDA obligations as part of offboarding

How Is an NDA Different From a Non-Compete Agreement?

An NDA restricts what an employee can disclose or use; a non-compete restricts where they can work. Many employers use both, since they address different risks.

An NDA is generally the easier and more reliably enforceable tool of the two, which is why some employers rely on strong NDAs and narrower non-solicitation terms instead of a broad non-compete, an approach Forbes has highlighted as the more durable strategy as non-compete law keeps shifting.

This connects closely to other terms in HR Cloud's HR glossary, especially the non-compete agreement, and to ongoing communication through employee engagement tools that reinforce confidentiality expectations.

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Frequently Asked Questions

Q: Can an NDA prevent someone from ever discussing their job?

A: No. A well-drafted NDA covers specific confidential business information, not an employee's ability to describe their general role or industry experience to future employers.

Q: Does an NDA survive after employment ends?

A: Yes, most NDAs are specifically written to continue applying after the employment relationship ends, sometimes indefinitely for trade secrets.

Q: Can an NDA prevent an employee from reporting illegal activity?

A: No. NDAs generally can't and shouldn't be used to prevent reporting illegal conduct to a government agency, and attempting to do so can itself create legal risk.

Q: Is a verbal confidentiality agreement enforceable like a written NDA?

A: It's much harder to enforce. A written, signed NDA provides clear evidence of the specific terms both parties agreed to.

Q: Do contractors need to sign an NDA too?

A: Yes, if they'll have access to confidential information, contractors should sign an NDA just like employees, since they aren't otherwise bound by internal company policy.