Confidentiality Agreements and Unpaid Work: Legal Rights and Recourse

It is no secret that many employers ask their consultants and employees to sign confidentiality agreements (NDAs). However, not all NDAs are created equal, and what happens if an employer fails to pay for the work done? What are the legal implications?

Understanding the Contractual Clause

Most contracts, including NDAs, typically contain a clause stating that if any part of the contract is breached, the entire contract may remain in effect. This can be confusing and detrimental for employees who have provided valuable work and have not been paid.

However, it's important to remember that the service component of the contract is dependent on being paid. If an employer fails to pay, there may not be a requirement to honor the terms of the contract, unless the agreement is separate and voluntary.

Separate vs. Imposed NDAs

If the confidentiality agreement was separate from the work contract, it stands as a separate clause. But if the NDA was imposed, typically after the hire, and not part of the initial agreement, it lacks legal standing. This is because such agreements are not considered voluntary if forced upon an employee post-hire.

For example, if an employer demands an employee sign an NDA after they start work, this post-hire requirement may not hold up in court. Similarly, if an NDA is imposed as an additional condition after the main contract has been signed, it may lack validity, especially if the contract includes a whole of contract clause prohibiting such conditions.

Legally Binding Terms

Many NDAs cover conditions governing the handling of confidential information, such as prohibiting the sharing of certain project details. These terms are often separate from the payment agreement. In most cases, the non-disclosure part of the contract is still binding, even if the employer breaches the payment terms.

For instance, a consultant who drafts a plan for a new product launch might sign an NDA stipulating that they cannot disclose specific details about the project before or after its launch. The payment for their work, however, may be covered by a separate agreement or contract.

Seeking Recourse

While the non-disclosure agreement is still binding, it is important to seek legal advice to navigate the situation. The best course of action is to pursue legal action to recover the money owed to you, plus any legal costs. The specific legal recourse depends on the legal framework of the country where the contract was registered. Most contracts contain a clause specifying which laws apply in case of any conflicts.

Note: This article is not legal advice, and the specific legal rights and obligations may vary depending on the terms and conditions of your contract. It is always advisable to consult a legal professional for specific guidance.