Confidentiality Agreement for Contract Workers
It is a written legal document between a contractor and employer specifying certain terms and conditions that govern the working relationship.3 min read
A confidentiality agreement for contract workers is a written legal document between a contractor and employer specifying certain terms and conditions that govern the working relationship. Most importantly, this type of agreement prevents the worker from sharing the business's proprietary and confidential information with any third party. This legal document keeps trade secrets, product and client information, strategic plans, and other proprietary knowledge away from competitors.
Aspects of a Confidentiality Agreement
For contract workers, the confidentiality agreement is usually in effect for the term of the project and for a specified amount of time thereafter. In most cases, a confidentiality agreement is valid for one to three years and will indicate specific information and activities that are prohibited from disclosure.
When confidential information is discussed in an interview, such as for a senior-level or management position, the candidates may be asked to sign a confidentiality agreement prior to being interviewed. This is also true before a contractor is given an assignment that includes confidential information, including vendors that will have access to knowledge about parts and products and situations involving mergers, acquisitions, or stocks.
Benefits of Independent Contractor Agreements
Unlike a traditional employee who is hired on a permanent basis, a contractor is hired for a specific task, project, or time period. He or she does not receive employee benefits or paid holidays and must withhold taxes independently. Contractors can work independently and can have projects with several employers at once.
Because hiring full-time employees is expensive, many companies rely on contracted consultants for tasks ranging from IT to bookkeeping to marketing and beyond. Ideally, your business should establish a legally binding independent contractor agreement when hiring consultants and project-based workers.
This agreement helps prevent conflict by laying out the terms and conditions of the project and declaring that the worker in question is a contractor, not a permanent employee. While employees are bound to act with a duty of loyalty to their employer and face personal liability if they share confidential information, contractors are not.
Contractors may also work for your competitors and even start companies that compete with you directly, so access to confidential information can be valuable if they are unscrupulous. However, you can pursue legal action against a consultant that steals and/or shares a trade secret. The existence of a signed confidentiality clause can serve to deter consultants from taking and using confidential information.
Most contractors will require your business to sign their standard agreement in addition to the agreement that you provide. Your attorney should carefully review both agreements to make sure that their provisions are not conflicting with one another. Ambiguities will require a court or arbitrator to weigh in if a conflict arises during the course of the work engagement.
Aspects of Independent Contractor Agreements
The independent contractor agreement should:
- Detail the exact services the consultant will provide, including the scope of work and whether subcontractors will be hired.
- Establish a payment schedule and amount. Indicate whether the consultant is charging a project-based or hourly rate.
- Establish the timeline for completion of the work, including dated milestones, stages, and deadlines. You may want to also provide incentives for turning in work early.'
- Indicate who will provide the materials and tools needed for project completion, including equipment and workspace where applicable.
- Include a work for hire clause that establishes your ownership of any work created during the course of the project, such as websites, graphic design, or software code.
- Provide a method for solving contract disputes, such as requiring arbitration instead of court.
- Indicate the circumstances under which the contract can be terminated by either party, the required notice, and how outstanding payments and work will be handled.
- Include a non-disclosure clause that prevents the contractor from sharing confidential information.
You may want to create a separate non-disclosure agreement (NDA) rather than rely on a clause if you also want to include non-solicit and non-compete provisions. The latter prevents the contractor from working for competitors in a certain geographic area or industry for a set amount of time. The former keeps contractors from stealing your employees or clients.
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