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employment

Non-disclosure agreements (NDAs) in employment

Key Takeaway

Non-disclosure agreements (NDAs) in New Zealand employment protect confidential information. While generally enforceable, NDAs cannot override an employee's right to raise a personal grievance or make a protected disclosure (whistleblowing) about serious wrongdoing. NDAs in personal grievance settlements require independent legal advice for validity.

Understanding Non-Disclosure Agreements (NDAs) in Employment

A Non-Disclosure Agreement (NDA), often referred to as a confidentiality agreement, is a legally binding contract that creates a confidential relationship between parties. In an employment context, an NDA typically obliges an employee to keep specific information confidential and not disclose it to third parties without permission. The primary purpose of an NDA is to protect an employer's sensitive information, such as trade secrets, proprietary business methods, client lists, or financial data.

The Legal Framework Governing NDAs in New Zealand Employment

While the Employment Relations Act 2000 (ERA 2000) does not specifically regulate NDAs, several New Zealand statutes and legal principles affect their enforceability and scope.

Good Faith Obligations

Both employers and employees are required to deal with each other in good faith [Source: Employment Relations Act 2000, s 4]. This obligation of good faith (acting honestly, openly, and constructively) extends to the negotiation, terms, and enforcement of an NDA. Terms that are oppressive, unreasonable, or designed to mislead may be challenged under this principle.

Protection of Whistleblowers (Protected Disclosures)

The Protected Disclosures (Protection of Whistleblowers) Act 2022 is a critical piece of legislation that limits the scope of NDAs. This Act protects individuals who make a protected disclosure (often called whistleblowing), which is the revelation of information about serious wrongdoing within an organisation [Source: Protected Disclosures (Protection of Whistleblowers) Act 2022, s 6].

Serious wrongdoing includes unlawful acts, risks to public health or safety, or gross mismanagement [Source: Protected Disclosures (Protection of Whistleblowers) Act 2022, s 8]. Crucially, an NDA or any confidentiality undertaking cannot prevent an employee from making a protected disclosure [Source: Protected Disclosures (Protection of Whistleblowers) Act 2022, s 16]. Employers are prohibited from disadvantaging an employee for making a protected disclosure [Source: Protected Disclosures (Protection of Whistleblowers) Act 2022, s 12].

Personal Grievances

An NDA cannot prevent an employee from raising a personal grievance (a claim made by an employee against an employer concerning issues such as unjustifiable dismissal, disadvantage, discrimination, or harassment) [Source: Employment Relations Act 2000, s 103(1)].

NDAs are frequently included as part of settlement agreements (legally binding agreements that resolve a dispute, often a personal grievance). For such a settlement agreement to be legally binding, it must be in writing, the employee must be advised to seek independent legal advice before signing, and a representative of the employer must sign it [Source: Employment Relations Act 2000, s 149].

Health and Safety at Work

The Health and Safety at Work Act 2015 establishes duties for employers to ensure the health and safety of their workers and others affected by their work. An NDA cannot override these statutory duties. For example, reporting health and safety incidents or concerns is a legal requirement [Source: Health and Safety at Work Act 2015, s 43, s 44]. The Act explicitly states that any term of an agreement that purports to exclude, limit, or modify its application has no effect [Source: Health and Safety at Work Act 2015, s 48].

Human Rights Considerations

NDAs cannot be used to conceal or prevent the reporting of discriminatory practices that violate the Human Rights Act 1993, which prohibits discrimination on various grounds [Source: Human Rights Act 1993, Part II]. A contract term that seeks to authorise unlawful discrimination would generally be unenforceable.

Key Elements and Limitations of NDAs

Scope and Reasonableness

For an NDA to be enforceable, the scope of information covered and the duration of the confidentiality obligations must be reasonable. Overly broad or perpetual NDAs that restrict an employee from using general skills and experience acquired during employment may be challenged as being in restraint of trade and therefore unenforceable.

Independent Legal Advice

While not always a strict legal requirement for a standalone NDA, it is highly recommended that employees seek independent legal advice before signing any NDA, especially if it appears to limit their future employment prospects or rights. As noted, it is a statutory requirement for settlement agreements resolving personal grievances to advise the employee to seek independent advice [Source: Employment Relations Act 2000, s 149].

Enforcement

A breach of an NDA by an employee can lead to legal action by the employer. Remedies may include an injunction (a court order compelling a party to do or refrain from specific acts) to prevent further disclosure, or a claim for damages (financial compensation for losses suffered due to the breach).

When to Seek Independent Legal Advice

Persons involved in employment disputes, considering signing an NDA, or concerned about their rights and obligations under an existing NDA, should seek independent legal advice. Information and assistance can be obtained from Community Law Centres or a qualified employment lawyer.

Key Resources