Are NDAs legally binding in Australia? A guide for employers

Companies hiring in Australia use non-disclosure agreements (NDAs) to ensure the confidentiality of trade secrets and other proprietary information before working with new employees or third-party entities. IP Australia, the country’s intellectual property agency, recommends getting an NDA signed before revealing anything from business strategies to plant breeding secrets.

But in Australia, an NDA won’t always withstand legal scrutiny; there’s been a new push to discard any confidentiality agreement that covers up sexual harassment and other workplace misconduct.

Read on to learn how NDAs are used in Australia, how they should be framed to stay legally enforceable, and how they can protect your workforce’s sensitive information.

What is an NDA?

An NDA is a legal contract prohibiting one or more parties from sharing confidential information with third-party people or entities. In an NDA, all signees agree to protect the sensitive information stipulated in the contract from the public or any third parties.

In Australia, NDAs are often used to protect a company’s confidential information outside of the workplace. They can also ensure employees don’t divulge sensitive information after leaving the company. Protected information can include:

• Trade secrets
• Proprietary technology
• Business plans, strategies, and tactics
• Personal information of clients or co-workers
• Passwords
• Any information not intended for public consumption

Are NDAs enforceable in Australia?

Yes, NDAs are enforceable by Australian courts.

In recent years, however, NDAs have come under fire for allowing Australian companies to cover up workplace misconduct such as sexual harassment and discrimination. The Australian Attorney General, Mark Dreyfus, recently committed to strengthening laws against NDAs that shield companies from criminal workplace behaviour.

To ensure a confidentiality agreement holds up to legal scrutiny, it should include the full names of the consenting parties, a thorough definition of the information that can’t be disclosed, situations where the NDA is nullified, and provisions for maintaining confidentiality after an employee is terminated.

You can generate NDAs, offer letters, and any other documents you need, then easily send them out for e-signing—all through Rippling.

3 things you need to know about NDAs in Australia

1. There are different types of NDAs

In Australia, there are two types of NDAs you're most likely to encounter:

• Mutual NDAs. Also known as bilateral or two-way NDAs, mutual NDAs are a type of agreement in which all parties in the NDA are contractually bound to share certain information with one another, but no one outside the agreement. Mutual NDAs are often part of mergers, acquisitions, negotiations, and similar deals involving the exchange of business information.
• Non-mutual NDAs. Also known in Australia as unilateral or one-way NDAs, these types of NDAs require only one party in the agreement to receive sensitive information without leaking or sharing it with anyone else. These types of NDAs are more common in employer-employee business relationships; an employer assigns mutual NDAs to a new employee when hired, and it often covers intellectual property rights and inventions. They can also be a part of seller-buyer agreements, a company’s agreements with independent contractors, and protect inventors from copyright infringement.
• Multiparty NDAs. Also known as multilateral NDAs, multiparty NDAs are set up between more than two parties. While these are less common, they allow for one party to disclose information that the other two parties are expected to keep private, eliminating the need to create multiple NDAs.

2. There are essential components to make NDAs enforceable

These are the things that an NDA should include to be comprehensive and enforceable:

• Clear indication of the parties involved. This should include their names and roles, including who'll be sharing and receiving confidential information (i.e. the consent of the disclosing party and the receiving party) and who they'll be sharing such information with.
• Definition of confidential information. This should include the general topic of information covered by the NDA, as well as the scope of information that's covered. It should also define how such confidential information is shared; for example, is written information considered confidential, but oral information isn't? This section generally starts with 'for the purposes of this agreement…'
• Exclusions from confidentiality. The contract should include any cases in which parties in the NDA are allowed to disclose confidential information (for example, after the information becomes public knowledge).
• Terms of the agreement. How long does the NDA last? For employment NDAs, they typically last for the duration of the working relationship, but they can last longer.
• What will happen if the NDA is breached? It's a good idea to include provisions that outline any injunctions, damages, or other consequences for breaching the NDA.

3. There are certain circumstances where NDAs aren’t viable

There are limitations on what an NDA can conceal. Courts won’t enforce confidentiality agreements that prohibit signees from reporting on a crime. They’ll also nullify NDAs that don’t comply with public policy or are otherwise unreasonable. The terms should also not be too broad, and courts may invalidate any agreements that go against the public interest.

When would an employee or contractor sign an NDA?

It's common for employees and contractors in Australia to sign NDAs during their onboarding or when they start a new work contract. An NDA may also be included as a confidentiality clause in a new hire's offer letter or employment contract.

Frequently asked questions about NDAs in Australia

Are NDAs enforceable in Australia?

In Australia, an NDA is considered a legally binding contract. Courts have historically upheld them as enforceable legal documents as long as they comply with other laws.

However, it's important to note that employment laws and other regulations that affect NDAs can change. After an Australian Human Rights Commission report found that workplaces used NDAs to settle sexual harassment cases, Australian authorities have agreed to implement best practice principles to mitigate its use as a tactic to cover up misconduct. Generally speaking, NDAs are only enforceable if they’re reasonable, specific, and within the public interest.

Are NDAs enforceable overseas?

The enforceability of an NDA in Australia overseas depends on the specific terms of the agreement and the laws of the country where the NDA is being enforced.

In general, an NDA that's valid and enforceable in Australia may also be enforceable overseas, particularly in countries that recognise and enforce foreign judgments. However, many factors can affect the enforceability of an NDA in a foreign jurisdiction, such as differences in legal systems, cultural norms, and public policy considerations.

What information can be covered by an NDA?

In Australia, information that's considered confidential or proprietary can be covered by an NDA. This includes:

• Trade secrets and proprietary information. This can include things like manufacturing processes, formulas, designs, and technology that are unique to a company and provide a competitive advantage.
• Financial information. This can include confidential financial statements, budgets, sales figures, potential investors, and projections.
• Customer information. This can include customer contact information, purchasing history, and preferences.
• Intellectual property rights. These typically include patents, trademarks, copyrights, and other types of intellectual property that a company owns.

An NDA (Non-Disclosure Agreement) cannot include information that's already publicly available or falls within the public domain. One is usually allowed to share confidential information with law enforcement or in a court setting.

When should you use an NDA?

Common situations to use an NDA in Australia include:

• When an invention or business idea is being presented to a potential partner, investor, or employee.
• When financial information is being shared with a potential partner or investor.
• When a new product or technology is being shown to a prospective buyer.
• When sensitive company information is shared with an employee or contractor.
• When access to proprietary or confidential information is given to employees or contractors.
• When customer information is shared with employees or contractors.

Rippling makes it simple to create and send out an NDA as part of a job offer package.

Is an NDA the same as a confidentiality agreement?

Yes. Non-disclosure agreements may also be called confidentiality agreements (CAs), confidential disclosure agreements (CDAs), proprietary information agreements (PIAs), or secret agreements (SAs).

Is an NDA the same as a non-compete agreement?

No. An NDA differs from a non-compete clause or non-solicitation agreement. While both types of agreements are used to protect a company's interests, they serve different purposes.

A non-compete agreement is a contractual agreement between an employer and an employee that restricts the employee from engaging in certain competitive activities for a specified period after leaving the company.

The purpose of a non-compete agreement is to prevent a former employee from using the knowledge, skills, and business opportunities acquired during employment to compete with your company.

Benefits of NDAs in Australia

An NDA can help protect employers' confidential information and proprietary assets, which can be crucial to a company's success in today's highly competitive business environment. Benefits include:

• Legal protection for confidential information, trade secrets, and other proprietary information that is disclosed to another party.
• Prevention of unauthorised disclosure of confidential information by requiring the recipient to keep the information confidential and not to disclose it to third parties.
• Legal recourse to seek damages and other remedies under the terms of the agreement if a recipient of confidential information breaches the NDA.
• Protection of intellectual property, such as patents, trademarks, and copyrights.

How long can an NDA last in Australia?

An NDA can last indefinitely in Australia without a fixed time limit in the agreement, provided it stays reasonable and complies with existing laws.

What happens if an NDA is breached?

The penalties for breaching an NDA can vary depending on the severity of the breach, the penalties outlined in the NDA, and whether the breach violated any laws. However, an NDA is a legally binding contract, so any breach means legal action can be taken against the violating party. The NDA should have a 'breach of this agreement' clause that outlines expected consequences.

Run your global workforce in Australia with Rippling

With Rippling, you can onboard employees and contractors in Australia in just 90 seconds. ​​Generate NDAs, offer letters, and any other documents you need, then easily send them out for e-signing.

Plus, you can pay all of your employees and contractors in Australia, and around the world, without waiting on transfers or currency conversion.

Rippling allows you to manage HR, IT, and Finance in one unified system—and automate your global compliance work. See Rippling.

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax help, legal services, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.