When you’re working with self-employed independent contractors, or third-parties from outside of your own organization, a non-disclosure agreement (NDA) is a must-have.
When done right – an NDA can protect your business needs and intellectual property, without causing any harm to the freelancer or independent contractor you’re working with. Yet often just the words Non-Disclosure Agreement can raise the hackles of your freelancers. What gives?
This article is part of our guide on independent contractors’ agreements.
What is an NDA?
NDA is sometimes called a secrecy agreement, proprietary information agreement, or confidentiality clause. It is a legally enforceable document that explains that the signee cannot disclose certain information about your company, even once the terms of your arrangement are complete.
Your freelancers and agencies are working with other companies, by definition, and there’s a chance some of them will be in the same industry as your own. An NDA either as part of your contract with your freelancers or as its own standalone document, can ensure that they will not share your intellectual property or trade secrets with others or use them with other clients.
Why is it important to get freelancers to sign a freelancer NDA?
While full-time employees come with references, background checks and often a lengthy hiring process, freelance relationships can be much more casual. Hiring managers can search on freelance marketplaces like Upwork or Fiverr at 9am, and request an initial project just hours later. A freelancer NDA is an added layer of trust that your freelancer is being straight with you, and that even if they only work with you for a single short-term project, they can’t take your information elsewhere.
Getting your freelancer to sign an NDA is also a clear and unambiguous way to explain what’s sensitive or private about the work that they are doing. Freelancers are separate from the rest of your employees, and what may be obvious when you’re in the office – may not be to someone who doesn’t participate in company meetings or understands the competitive environment.
An NDA can also help to set expectations during the onboarding process, outline the sensitivity of certain information, and explain to the freelancer what the consequences would be for the business and themselves if certain elements of the way the business works came into the public eye.
What can an NDA protect, and what isn’t covered?
Let’s say you have a freelance developer working for your company, and you ask them to sign a freelancer NDA. Remember that you can only protect your own proprietary information that is kept inside the walls of your organization. You can’t protect ideas, (no matter how impressive they might be) and you can’t protect public knowledge, such as open-source code snippets. Anything this developer knew before they started working with you is also fair game, as well as anything that falls outside of the scope of the specific projects they are working on with you.
What can be protected is your own secret sauce, the ingredients that only people with access to confidential information inside the company would be aware of. If it turns out you don’t work for Coca Cola – this probably won’t be that simple to narrow down. However, a non-comprehensive list includes:
· The names and details of your customers, including sales data and financial data
· Marketing and sales leads, such as prospect names or targeted companies for approach
· Plans for future feature updates or releases
· Design or implementation processes for how a product is created or maintained
Why do freelancers worry about signing NDA?
An NDA is not the same as a non-competition agreement, but many of your freelancers do not understand the difference. It also doesn’t automatically mean that your freelancers aren’t allowed to tell anyone that they work for you. It’s important to be clear on that point when you speak to your independent contractors.
The main reason why freelancers get cagey about signing an NDA is that they are worried they won’t be able to go and work for other organizations in the same field, or use the work that they do for you as part of their own self-marketing. This can be a serious problem for freelancers.
After all, 46% of freelancers say that word of mouth is their top method of finding work. If your contractors are contractually barred from working for those in the same industry, and they can’t share the work that they do for you in their portfolio, they might not feel that the juice is worth the squeeze.
Another reason to move away from non-compete language or clauses in your contracts is that they are often unenforceable. In the US, most states believe that non-compete clauses are unconstitutional and put up unnecessary walls that hinder free trade.
While non-compete may not be a smart addition, many companies might have legitimate reasons for not wanting their freelancers to share the relationship or content that they create widely. If you would rather that your freelancers didn’t use your content in their portfolio, consider alternate ways that you can support them in their goals, such as providing testimonials or references as social proof, offering an anonymous case study, or allowing them to share projects privately via email but not publicly on their website.
What should you include in your freelancer NDA?
So, that covers what needs cutting out or amending. What should you include in your NDA?
1. Define what you consider to be confidential: There’s a sweet spot to be found here. Use overly-broad terms like “proprietary information” and your NDA may not be enforceable. If instead you go too narrow, like “lines 5-7 of document 86b”, and other confidential matters may end up unprotected. Specify what’s confidential by the types of information, like client PII, or information on future product releases.
2. Include a non-use clause: Remember, it’s not just about your freelancers not talking about confidential information, it’s also about the use of those assets. Your software developer can’t use proprietary code for another client, and your graphic designer can’t provide insight into your future brand changes in return for a role for the competition.
3. Duration of the agreement: Your freelancer NDA shouldn’t be completely open ended. Especially if you’re limiting the disclosure of your working relationship, if you make this time period too long you could inhibit the quality of freelancers you’ll be able to work with. On the other hand, if you make it too short – your information could be disclosed before you feel comfortable sharing it publicly. Around 2 years is a common time frame to rely on.
4. Requirements and consequences: Don’t forget to outline what is expected of your freelancers, including what the process should be for deleting or returning sensitive information once a project is complete. Lastly, outline the legal action that you will pursue if your freelancer doesn’t comply with the terms, including the monetary damages that they could incur.