NON – DISCLOSURE AGREEMENT (NDA) AND FREELANCERS

When it comes to hiring a freelancer, the question that comes to mind is what are the advantages and what are the challenges of such an endeavor? The biggest advantage of hiring a freelancer is that this cooperation can be stopped at any moment, as hiring a freelancer does not imply having an employment contract and obligations that derive from it. On the other hand, the biggest disadvantage of hiring a freelancer is probably that a freelancer can at any time find and accept other business opportunities that suit him/her better. This can end your business cooperation and delay the realization of your business aspirations. Aside from all that, cooperation between a freelancer and a client requires the exchange of a substantial amount of information, and the best way to secure the confidential nature of the data and to protect it from misuse is to conclude a so called Non – disclosure Agreement (NDA).

NDA as a matter of necessity

To be able to enjoy all the merits of hiring a freelancer and at the same time to avoid disadvantages that come from this business cooperation, NDA becomes a sort of necessity. Concluding this kind of a contract is the best way to secure confidentiality of the information about the client and its business practices. There are various information that can be protected by this contract, such as: business concepts, ideas, exchanged information, patents, intellectual property (rights), including also company management processes. It is very important to carefully specify in the NDA contract which information and data are considered confidential.

Some data is usually excluded from the NDA, such as: information that is already available, freelancer’s know-how, and information that freelancer already made available to the third parties before concluding the NDA, information that has to be provided upon the request of a government entity, etc. It is very important to emphasize that NDA does not include on its own any kind of a transfer of property rights or intellectual property rights from freelancer to client and vice versa. A special contract can be concluded for any kind of these types of transfers, or they can be incorporated in the NDA contractual provisions that refer to transfer of property rights or intellectual property rights between contract parties. In that case, NDA becomes a mixture of several types of contracts.

The obligatory side of the NDA

Once the freelancer signs the NDA contract, he or she is obliged to respect all contractual provisions, or otherwise freelancer can face claims. If contracting parties do breach the NDA provisions – for example a freelancer shares the confidential information from a business relationship with the client with a third party – the best course of action is to contact the lawyer immediately, so that the harm can be neutralized as much as possible. Contracting parties cannot share with anyone the information described as confidential in the NDA, not even with family members or friends, and especially cannot share them on social and business media that are available to an enormous auditorium. NDA does not oblige only the freelancer as a contracting party, it also obliges all the freelancer’s sub-contractors hired to work on the project protected by the NDA, so it is very important to emphasize in the NDA that third parties might also be involved in the project.

One-way (unilateral) or two-way (mutual) NDA

If only the client is the one that wants to protect its confidential data, and the breach of the NDA is coming from the freelancer, then this type of NDA is called a one-way or unilateral NDA. But in practice, the common form are the so called mutual NDAs in which a client and a freelancer both want to protect their confidential data, know-how and business practices, and in which both parties are obliged to respect contractual provisions of the NDA.

Situations in which a freelancer should pay extra attention are especially when the client, through the NDA, wants to exclude any other kind of freelancer engagement on other projects that are in competition with the current client’s project. Advice for the freelancer in this scenario would be that this kind of wide contractual provisions are enhanced so to have more precise possible prohibitions in relations with other freelancer’s projects, as well as more precision on possible penalties. This is very useful, because most freelancers have multiple projects for different clients at the same time. Also, there could be prohibitions in the NDA, which refer to the possibility to present the projects on which the freelancer worked for the client as references to third party clients.

General advice for the freelancers would be that they should not sign any kind of NDA where the client is unwilling to agree upon equal protection of the freelancer as a contracting party.

Legal application of the NDA

If the NDA contracting parties breach their obligations, like in the case with any other contract, possible judicial proceedings can be very long and expensive. In that sense, even if there is a very well written NDA, both client and a freelancer should limit as much as possible the quantity of exchanged information and data. Both parties, when sharing data, should have a written correspondence with emphasis that exchanged information is confidential.

The most important thing when it comes to the legal application of the NDA is which law is applicable in the case when the NDA provisions are breached. The best option is to agree upon the law with which you are most familiar with, meaning that you have a legal professional who can quickly and efficiently interpret the applied law at any given moment.

Marko Petkovic