Understanding NDAs: What You Need to Know Before Signing

Whether you're starting a new job, taking on a freelance project, or discussing a potential business partnership, chances are you'll be asked to sign a Non-Disclosure Agreement (NDA). These contracts are so common that many people sign them without reading carefully. That's a mistake.

What Is an NDA, Really?

An NDA is a legally binding contract that creates a confidential relationship between parties. The person or company sharing information (the "disclosing party") wants to ensure that the person receiving it (the "receiving party") won't share it with others.

NDAs protect things like:

• Trade secrets and proprietary processes
• Customer lists and business strategies
• Upcoming product launches
• Financial information
• Software code and technical specifications

What they're not designed to do is prevent you from talking about your general work experience or silence you about illegal activity.

Two Types of NDAs

Unilateral NDAs are one-way agreements. One party (usually the employer or client) shares confidential information, and the other party agrees not to disclose it. These are common in employment and contractor relationships.

Mutual NDAs (also called bilateral NDAs) go both ways. Both parties share confidential information and both agree to protect what they learn. These are typical in business partnerships, mergers, or when two companies are exploring working together.

If you're sharing valuable information too, make sure the NDA protects you as well.

How Long Do NDA Obligations Last?

This varies significantly and is one of the most important things to check. NDA durations typically fall into a few categories:

• Fixed term: The confidentiality obligation ends after a specific period (often 2-5 years)
• Indefinite: The obligation continues forever, or until the information becomes public
• Until public disclosure: The obligation ends when the information is no longer secret

For trade secrets, indefinite protection is reasonable—after all, Coca-Cola's formula has been secret for over a century. But for general business information, an indefinite NDA may be excessive.

Key question to ask: When does my obligation to keep this information confidential end?

What NDAs Cannot Cover

NDAs have legal limits. They cannot be used to:

• Silence whistleblowers: You can always report illegal activity to appropriate authorities
• Cover information already in the public domain: If it's publicly available, it's not confidential
• Protect information you already knew: Knowledge you had before signing can't suddenly become confidential
• Prevent court-ordered disclosure: If a court compels you to testify, the NDA doesn't override that
• Hide information discoverable through legitimate means: If someone could figure it out independently, it's not truly confidential

If an NDA seems to prevent you from reporting illegal activity or discussing workplace safety issues, that clause likely isn't enforceable.

Consequences of Breaking an NDA

Breaching an NDA can have serious consequences:

• Legal action: The disclosing party can sue for damages
• Injunctions: A court may order you to stop disclosing information
• Financial penalties: You may owe monetary damages, sometimes substantial
• Reputation damage: Word gets around in professional circles
• Employment consequences: Breach during employment typically means termination

The severity depends on what was disclosed and the actual harm caused. Accidentally mentioning something minor is very different from deliberately sharing trade secrets with a competitor.

Questions to Ask Before Signing

Before you sign any NDA, get clear answers to these questions:

1. What specifically is confidential? Vague language like "all information" is a red flag.
2. How long does the obligation last? Make sure this is reasonable for the type of information.
3. What are the exceptions? Can you share with your lawyer? Your spouse?
4. What happens when the relationship ends? Are you still bound? For how long?
5. Is this mutual or one-way? If you're sharing valuable information too, you deserve protection.
6. Can I still do my job? Will this NDA prevent you from working in your field later?

When to Push Back

Not every NDA is reasonable, and you have the right to negotiate. Consider pushing back if:

• The definition of confidential information is overly broad
• The duration is unreasonably long (more than 5 years for general business info)
• There's no exception for information you already know
• The NDA seems to overlap with or extend a non-compete clause
• You're not given adequate time to review before signing

A reasonable employer or client will understand your concerns. If they refuse to discuss the terms at all, that itself tells you something.

The Bottom Line

NDAs are a normal part of business, and most are perfectly reasonable. But "everyone signs these" isn't a reason to skip reading carefully. Take the time to understand what you're agreeing to, ask questions about anything unclear, and don't be afraid to negotiate terms that seem unfair.

Your signature creates a legal obligation. Make sure you know exactly what that obligation entails before you commit.