When you hire contractors or remote workers, they often need access to proprietary information to fulfil their duties. They may need to see client lists, access financial information, and stumble across trade secrets and intellectual property (IP) not yet available to the public.
And because contractors often work with competitors and it’s harder to monitor their work compared to employees, there is a risk that valuable information can be leaked or stolen.
Non-disclosure agreements (NDAs) ensure that this information is prevented from misuse by clearly defining information that should be kept private and explaining the consequences of misuse.
In this article, we look at how to create NDAs for contractors and remote workers that protect your company, clients, and customers.
What is an NDA?
An NDA is a contract between two parties that protects confidential information by prohibiting its sharing with unauthorized third parties.
This agreement is given to any employee or contractor who will be exposed to sensitive or confidential business information. An NDA for contractors, for example, protects information about the business and its clients.
NDAs typically include penalties for breaching the agreement, as well.
An NDA can protect the following types of information:
Contracts with other companies
Client or customer lists
Client or customer data
Financial information
Intellectual property
Marketing plans
Business plans
Product prototypes/inventions
Trade secrets
Why you should use an NDA for contractors and remote workers at your company
The primary reason why NDAs are important is that they protect trade secrets and confidential information from being shared with competitors. In essence, they help safeguard a business’s competitive advantage.
NDAs also manage conflicts of interest. Contractors, in particular, often work with competing businesses. The confidentiality contract acts as a deterrent to sharing competitors’ information.
Finally, an NDA provides clarity about what is and isn’t considered confidential. Workers may forget that your business’s processes aren’t common industry knowledge, so an NDA outlines those secrets clearly.
NDAs are particularly important when working with contractors because your working relationship with them is typically short-term. Having a shorter working relationship can mean the contractor has little to no loyalty to your business and doesn’t mind if your competitors succeed.
And when it comes to remote workers outside the official office environment, NDAs are crucial. Remote workers may feel more lax about protecting company info. It can be difficult for you to track their actions and ensure they aren’t feeding confidential information to competitors, either on purpose or accidentally.
What should be included in an NDA?
You need to create legally compliant NDAs if you want their terms to be enforceable. NDAs must contain all the necessary information for them to be compliant.
Include the following information in every agreement contract:
The names of all parties involved
You must include the names of the business’s director or other legal personnel (if the business is a partnership, LLC, or corporation) or the name of the business owner (if the business is a sole proprietorship).
Include the name of the contractor or remote worker who’s signing the agreement, as well as the names of any subcontractors who will work with the contractor (whose names the contractor must provide).
The reason why you’re sharing confidential information
The NDA’s “Purpose” describes the services you’re hiring the contractor or remote worker for or the permitted use(s) of the information. This information helps to restrict the contractor or remote worker’s use of the information to the Purpose and provides clarity surrounding what is considered to be “misusing” the information.
Confidential information that the contract protects
The confidential information you describe in the NDA can’t be so broad or vague that it describes non-confidential information, like information that is already available or has been publicly shared.
Obviously, this section won’t contain the specifics of the confidential information, but it does describe the type of information the contractor or remote worker will need to keep secret.
You also describe the worker’s obligations and applicable excuses in this section. An applicable excuse would be that the recipient can disclose confidential information to specific representatives when evaluating the agreement and disclose any information required by law through a court order or other legal process.
Return of materials
This section describes what the recipient must do with all copies of confidential information once they’ve completed the Purpose. Typically, they must either return physical copies or destroy them.
Time period during which the NDA is effective
This period starts from the Effective Date and ends at the Expiration Date.
The recipient must maintain strict confidence for a set period of time, which should be as long as the information is likely to remain secret. In some cases, the information may stay confidential indefinitely — until it becomes readily available or publicly accessible.
Common breach penalties include the following:
Legal consequences, like suing for contract breach or pressing criminal charges
Financial consequences, like paying a significant fine
Personal consequences, like dismissing the contractor or worker
General provisions
Sometimes called “boilerplate,” this section details miscellaneous provisions at the end of the contract. General provisions can include things like:
Relationship : Disclaims any relationship between you and the recipient besides the one described in the contract.
Waiver : States that if you don’t complain about NDA violations promptly, you’re allowed to complain later.
Governing law : The name of the state or country in which the agreement was created and a description of the laws the agreement complies with.
Severability : States that if you end up in a lawsuit and a certain part of the contract is deemed invalid, the rest of the agreement is still considered valid.
Best practices for creating an NDA for remote workers and contractors
Remote work introduces new complications when protecting confidential business information because you’re protecting the information in decentralized digital locations.
Make sure to follow these best practices to keep your confidential data safe when working with remote workers and contractors:
Do your research
The differences in laws between a business’s country and a contractor or remote worker’s country are called jurisdictional differences .
You need to be up-to-date with all applicable state and federal laws to ensure you’re creating compliant agreements. So, if you’re hiring internationally , make sure you know the local laws of the country you’re hiring in.
Keep NDAs up-to-date
Regularly review and update your NDAs to align with any changes in legal requirements and regulations. Any changes to these agreements must be made in writing; otherwise, they’re not legally binding.
If you introduce any additional confidential information to an employee (after converting them from a contractor to an employee , for example), you can either create an extra NDA that covers only the new information or make an entirely new NDA that overrides the original one.
Hire legal help
Outsourcing legal expertise is always advisable when dealing with international contractors. This not only saves you time drafting and researching the specifics of the agreement, but it also ensures your agreements are legally compliant with current laws.
Remote’s team of employment experts has a good knowledge of local laws and can give you sound legal advice, helping you stay compliant and protected, no matter where in the world you are based.
Use Remote’s HR Management platform
Remote’s HR Management platform handles all parts of employee onboarding , including storing NDAs. It organizes all your employees and their data in one place, simplifying your HR duties and freeing up time so that you can focus on high-value work.
Remote’s global HR platform also allows you to store easy-to-access documents that reiterate what needs to stay confidential, helping your remote workers and contractors avoid accidentally breaching their NDAs.
What additional considerations are there when creating NDAs for international employees?
When hiring international employees or working with international contractors, you may need to spend some extra time considering the specifics of your NDAs.
Consider the following, for example:
Language barriers
If you’re building a global team, you need to consider language barriers and cultural differences when drafting NDAs to ensure that the contractor or remote worker’s customs are respected and that they fully understand the content and nature of the contract.
If you offer your agreement in multiple languages, making sure the translations are accurate and the nuances are clear also goes a long way toward protecting your IP and ensuring the contract remains legal.
Local laws
Different countries have their own rules that govern what can and can’t be covered in an NDA and different procedures following a contract breach. If an NDA isn’t legally binding in your contractor or remote worker’s country of residence, you won’t be able to do anything in the event of a breach.
So, you need to ensure each NDA is binding in your own country and the country where the recipient lives. This can be difficult to achieve, so it’s advisable to seek legal assistance when drafting an international NDA.
Remote’s legal team is well-versed in the labor laws of countries around the world. They can help you draft an international NDA from scratch or tweak an existing agreement to meet the requirements of your remote worker or contractor’s local laws.
Dispute venue
In the event of a breach, where will the dispute be handled? In other words, which country’s court will you turn to in order to settle the matter?
This information is incredibly important to include in an international NDA because your local laws might differ greatly from the laws of your worker or contractor’s country of residence. By assuming the matter should be handled in your country’s court, you give your business an unfair advantage over your workers.
Many businesses handle this situation by suggesting a dispute venue in the NDA and allowing the person signing to either agree or suggest another option.
Sometimes, businesses crafting international NDAs include an arbitrary dispute venue in the agreement. If you choose to do this, you might have some contractors or remote workers unhappy with your decision because they have no control over where the issue is dealt with.
Common FAQs about NDAs for remote workers and contractors
Do freelancers sign an NDA for every client they work with?
Yes, freelancers should sign a new NDA for every client they work with. If a business works with a freelancer repeatedly, the first NDA will cover all future projects unless the business shares new confidential information in a later project. In these cases, even if the freelancer starts a new project with the business, they don’t need to sign a new NDA because the original one is still binding.
If a contractor isn’t paid for a project, is the NDA still binding?
Yes. An NDA has nothing to do with the work a contractor does or is compensated for; it’s purely about not sharing the information they’re given. Unless the NDA explicitly states that they are allowed to breach the contract if they don’t receive payment, they cannot share the information they’re given.
This is because most courts expect them to take the correct action if they’re treated unfairly. If the contractor decides the agreement is invalid because the company didn’t pay them, the correct action (according to the courts) would be to demand payment, not to breach a different contract in retaliation.
Should a contractor sign before viewing any of the materials protected by the NDA?
Yes. Without signing the NDA before viewing the confidential material, a contractor has no legal obligation to treat the materials as confidential — or even to sign the NDA at all.
Why might a contractor refuse to sign an NDA?
A contractor can refuse to sign an NDA at any time, but they most often do so in the following scenarios:
If the NDA contains a non-compete clause: this limits the contractor’s other employment and client options.
If they have concerns about the employer: they worry that the agreement could be used against them in the future.
If the terms of the agreement are unfair or burdensome: the agreement may have too broad a scope or too long a duration.
Safeguard your business with Remote
Balancing the legal complexities of NDAs is daunting by itself. So, for many, balancing them on a global scale is the stuff of nightmares.
Thankfully, you don’t have to spend hours researching the local laws of each country where you’ve hired employees or contractors.
Remote has years of experience helping businesses transcend their borders and build diverse, distributed teams. With our expert legal advice and intuitive HRIS platform, you can manage contractors and remote workers from the signing of the NDA to offboarding.
