Non-disclosure agreements: types, legal use, and HR obligations

Executive overview

Trade secrets lack government registration, making them vulnerable to misappropriation by employees, contractors, or business partners. NDAs convert informal confidentiality expectations into enforceable legal obligations.

Three NDA categories exist — unilateral, bilateral, multilateral — each suited to different business relationships. HR owns the workflow: drafting with legal, embedding NDAs in hiring or onboarding, and tracking compliance.

Badly scoped or poorly timed NDAs are unenforceable; a lawyer and an HRIS are the minimum viable stack.

The three NDA categories

• Unilateral NDAs: one party restricts the other from disclosing predetermined information
• Bilateral NDAs: both parties share sensitive information; standard in mergers, acquisitions, and joint ventures
• Multilateral NDAs: single agreement covering three or more parties, replacing a stack of bilateral contracts

Four types of unilateral NDAs

• Employer-employee: protects trade secrets if a current or former employee discloses them to competitors
• Contractor NDA: covers information overheard, seen, or read on-site; can also enforce behaviour standards (e.g., no photos on set)
• Inventor-evaluator: prevents an evaluating company from stealing an invention while it is being assessed for purchase
• Seller-buyer: protects both sides when confidential operational or technical data changes hands during a sale

Factors that affect enforceability

• Overly broad language
• Illegality of the underlying restriction
• Lack of consideration given to the signing party
• Unconscionability or duress
• Risk to public health or safety
• Misrepresentation at signing

Legal and ethical requirements

• Identify only secrets critical to organisational success — do not use NDAs to suppress all speech
• Use a lawyer to draft; legal authorship reduces liability and closes loopholes
• Introduce the NDA as early as possible — candidate stage or first day of onboarding
• Maintain awareness of changing legislation (e.g., the 2023 Speak Out Act bars NDAs that silence sexual harassment victims)

HR's role in NDA management

• Write NDA language into the culture guide alongside definitions of what constitutes a trade secret
• Use an HRIS to store compliance documents, collect signatures, and gate onboarding progress until the NDA is signed
• Monitor legislative updates that may restrict NDA scope or enforcement
• Coordinate with legal if a confidentiality agreement is breached