NDAs (Non-disclosure Agreements) and NCAs (Non-compete Agreements) are contracts often used together when someone new is brought into an “in-the-works” or sensitive project to protect the project’s ingredients and the owner or creator. Though, very commonplace, especially in web-based projects, it’s important to understand that these two contracts are entirely different. So, the next time you’re about to sign one or request one for someone you’re hiring, decide whether they’re really necessary.
What’s an NDA in plain English?
A non-disclosure agreement basically means that you’ll keep privileged information private, as in between you and the company. Meaning, you won’t share company secrets or formulas, discuss the inner-workings or methodologies of the company with anyone. It’s pretty straightforward and common sense trust and ethical stuff, even without a contract.
The contract simply ensures for the company’s peace of mind that you’ll respect that trust or be held legally accountable for loss or damages that may occur from betraying that trust. In some places, an email or verbal agreement of confidentiality might be legally-binding as well. Think insider trading as a worst case scenario of breaking an NDA. I would say NDAs are overall friendly and acceptable to sign or ask someone else to sign in most cases. Again, this is basically adding a layer of protection to a handshake you’ll already be making with the other party.
What’s an NCA in plain English?
A non-compete agreement basically means that you won’t work for competing companies or you’ll be legally accountable, as in being sued. Think working for Apple and Microsoft at the same time as the worst case scenario of breaking an NCA. Worst, comes the possibility of trading company secrets with a competing company. An NDA will almost always accompany an NCA.
That’s all pretty straightforward and common sense so far. The trouble comes in when you realize what else an NCA entails. In most cases an NCA will also dictate that you can’t do your own thing either, as in you can’t start your own computer company (using our computer company analogy). Even scarier (depending on how specific the NCA is), it might even say that you cannot be involved in any project related to computers (outside of the company you sign with) at all.
When it comes right down to it, an NCA is contracting someone (buying someone) and basically hand-cuffing them to only work with your company, very corporate. So, for sole-proprietor projects, small and medium businesses and even many large businesses, I would say an NCA is not appropriate or reasonable for. Where an NCA might be appropriate, is when there is a lot of money involved, like signing a baseball player, actor, scientist, ad agency, etc. In a way (and to illustrate the dire seriousness of an NCA), it’s like in the US, as citizens, we’re basically automatically under contract to an NDA/NCA for our country (think treason).
I recently learned the hard way about NCAs when I’d asked for one for a pretty small project that I know now, was completely unnecessary and unacceptable to have asked for. When my ethics were questioned I immediately apologized after looking further into the issue and decided I’d write this article to further educate myself (and maybe others) on the subject.
While an NDA should absolutely accompany an NCA, an NCA should almost never accompany an NDA, probably 90% of the time.
I think NDAs are perfectly safe and acceptable in pretty much all business situations. Though, perhaps a bit annoying and inconvenient in some cases, say where the project is so simple and not sensitive data-wise in any conceivable way. Still, it’s not too much to ask for the clients’ peace of mind.
When it comes to an NCA, I’d recommend spending a good amount of time deciding whether it’s really necessary and if it is, consider wording it very carefully to not completely hinder the professionals’ creativity and productivity outside of your project.