What is a confidentiality agreement?

A confidentiality agreement, sometimes called a non-disclosure agreement (NDA), is a legal contract that outlines how sensitive information shared between two parties—typically an employer and employee—must be kept private. It helps protect your business’s confidential data, like trade secrets, customer lists, pricing models, and internal processes.

For small business owners, a confidentiality agreement can be a simple but powerful tool to reduce risk. If you're sharing proprietary information with a new hire, vendor, or contractor, this document helps ensure that your business's private details stay private.

What does a confidentiality agreement cover?

Confidentiality agreements can vary depending on your industry and what information you need to protect, but they typically cover:

What qualifies as confidential information – This might include customer lists, business strategies, software code, supplier info, or training materials
Obligations of the employee or party receiving the info – Usually, this means they cannot disclose, copy, or use the information for any purpose other than their work
Time period – How long the agreement lasts, which may continue even after the working relationship ends
Consequences of a breach – Legal remedies if someone breaks the agreement

These agreements can be signed as standalone documents or built into an employment contract or onboarding packet.

Why should small businesses use confidentiality agreements?

Whether you run a bakery, a boutique, or a consulting firm, you likely have internal information that gives your business a competitive edge. A confidentiality agreement can help:

Protect intellectual property and business know-how
Create a culture of professionalism and trust
Reduce the risk of leaks to competitors
Provide legal recourse in case of a breach

A confidentiality agreement helps you safeguard the information that makes your business unique. It’s not just for big corporations—any small business owner can benefit from putting a few basic legal protections in place.

Whether you're hiring your first employee or working with a contractor, a well-crafted confidentiality agreement can help set expectations, build trust, and give you peace of mind.

Who should sign a confidentiality agreement?

You may consider asking the following people to sign a confidentiality agreement:

Employees – Especially those who have access to customer data, pricing info, or proprietary systems
Independent contractors – Like freelance marketers, designers, or consultants
Vendors or suppliers – If they have access to your internal tools or processes
Job candidates – In rare cases where an interviewee might be exposed to confidential information during the hiring process

Be sure the agreement is reasonable and tailored to the person’s role—it should protect your business without being overly restrictive.

Tips for creating a strong confidentiality agreement

Be specific – Clearly define what information is considered confidential
Avoid overly broad language – Courts may not enforce agreements that seem too vague or far-reaching
Make it mutual (if needed) – If both parties are sharing confidential info, you might want a mutual NDA
Have it reviewed by a legal professional – Especially if you're dealing with sensitive intellectual property or hiring for key roles

When and how to present a confidentiality agreement

The best time to introduce this document is during the hiring or onboarding process. Let the employee know what they’re signing and why it matters. It can also be presented:

Alongside an employment agreement
Before a project or client-facing assignment
When a new system or tool containing sensitive info is rolled out

With Homebase, you can include confidentiality agreements in your onboarding checklist, track document completion, and securely store signed copies.

Try Homebase Hiring & Onboarding to simplify onboarding, paperwork, and team setup—all in one place.

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