Confidentiality or NDA

Summary

▪ A confidentiality or non-disclosure agreement (NDA) in an employment contract is valid.

▪ The NDA should cover confidential matters only.

▪ Employees who violate their NDA may be liable for damages.

1. Concept

a. Non-disclosure agreement

A confidentiality or non-disclosure agreement (henceforth, “NDA”) is an agreement whereby one party reveals confidential information to another who is under obligation not to disclose such information to any other persons or entities.

An NDA is valid as a post-employment restriction.

b. Confidential information

Employment contracts with NDAs are usually observed in employment arrangements whereby confidential information may be handled or processed by an employee.

Confidential information may refer to many things depending on how it is defined in the contract. The following are some of the possible coverage of confidential information:

1) Trade secrets;

2) Proprietary information or technology that is not made public;

3) Marketing and/or sales strategies or tactics;

4) Personal information or sensitive personal information of individuals that are being processed by the employer; or,

5) Any data or information that is intended not to be made public.

An NDA should cover confidential information only. Thus, if the information is already public or general knowledge, it cannot be the subject of an NDA.

2. NDA in employment contracts

Employment contracts with NDAs are valid. The NDA may be part of an employment contract by incorporating provisions on the body or separated as an attachment. In the alternative, the NDA may be a totally separate contract which may be provided with the employment contract or later when an employee would handling confidential information.

a. Duration

There is no law setting the duration of a non-disclosure agreement. The duration is what was stipulated by the parties. Hence, NDAs with a lifetime obligation not to disclose is valid and legal. This is particularly the case in industries where confidential information is valued highly, such as in pharmaceuticals, manufacturing, food establishments (for recipes), and so on.

b. Damages

The violation of an NDA may result in a claim for damages. Hence, employees who violate their NDA may be liable for damages.

The amount will depend on how much damage such disclosure has affected the employer. The employer may institute a civil case for breach or contract with damages against the employee who violated an NDA which prejudiced the employer.

3. Employment contract, company policies, CBA

The above discussions may be superseded by any stipulation favorable to the employee via an employment contract, company policies, collective bargaining agreement, or analogous thereto.

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References

▪ Book IV – Obligations and Contracts, Republic Act No. 386, a.k.a. Civil Code of the Philippines

▪ Jurisprudence or Supreme Court Decisions