Confidentiality Agreement

What Is a Confidentiality Agreement (NDA)?

A confidentiality agreement, also called a non-disclosure agreement (NDA), is an agreement that sets rules for protecting information shared in an employment, commercial or other professional relationship. It normally identifies the information that must remain confidential and limits how the recipient may disclose or use it.

The two names are generally interchangeable. An NDA can be one-way, protecting information supplied by one party, or mutual, protecting information exchanged by both. Whether the agreement is enforceable depends on the terms, the type of information, applicable law and the circumstances—not simply on the document’s title.

What Information Does an NDA Protect?

Business confidentiality agreements may cover technical drawings, source code, undisclosed pricing, product plans, supplier details, non-public customer information and other material that is legitimately sensitive to the business. The document should describe the protected categories clearly enough that the recipient understands their responsibilities.

An NDA commonly addresses several points:

• Permitted purpose: Why the information is being shared and which uses are allowed.
• Non-disclosure and non-use: Restrictions on sharing, copying, exploiting or using confidential material for unrelated purposes.
• Safeguards and access: Who may receive the information and what reasonable security measures apply.
• Exceptions: Treatment of information already public, independently developed or received lawfully from another source, and disclosures required by law.
• End of the relationship: Return or deletion of materials, continued confidentiality duties and any agreed dispute-resolution terms.

An NDA should not imply that all information possessed by an employer is automatically a legally protected trade secret. Nor can it override legal duties to disclose information to competent authorities.

How Are Trade Secrets Protected in China?

China’s Anti-Unfair Competition Law, as revised in 2025, protects qualifying trade secrets. In broad terms, information must be non-public, have commercial value and be subject to appropriate confidentiality measures. Article 10 prohibits specified improper acquisition, disclosure and use of trade secrets, including breaches of confidentiality obligations.

A confidentiality agreement is one useful protective measure, but it is not a substitute for controlled access, staff guidance, appropriate document handling and evidence that the information was actually protected. A publicly available customer contact or an employee’s ordinary professional skills do not become a trade secret merely because an NDA calls them confidential.

Contractual confidentiality can cover a defined range of sensitive information, while statutory trade-secret protection has its own legal conditions. The two forms of protection may overlap without being identical.

Employee Confidentiality Agreements in China

Article 23 of the PRC Labor Contract Law permits employers and employees to agree on safeguarding the employer’s trade secrets and confidentiality matters related to intellectual property. These terms may be included in a labor contract or documented in a separate confidentiality agreement.

For example, a software engineer who has access to unreleased product code may have an obligation not to disclose it to a future employer. A sales manager may need to protect non-public customer pricing. The agreement should make the obligations intelligible and relate them to information the employee can actually access.

Confidentiality obligations can continue after employment when legally valid and appropriately defined. However, an employer should not assume that signing a broad NDA authorizes unlimited restrictions on the employee’s subsequent career.

Is an NDA the Same as a Non-Compete Agreement?

No. An NDA is about keeping protected information confidential; a non-compete agreement restricts certain competitive employment or business activities. A former employee may be allowed to join a competitor while still being required not to reveal the previous employer’s trade secrets.

Under Articles 23–24 of the Labor Contract Law, post-employment non-compete restrictions are limited to eligible personnel, including senior managers, senior technical staff and other employees with confidentiality obligations. A lawful restriction must observe the agreed scope and geography, has a maximum post-employment term of two years, and involves employer-paid economic compensation during the restriction period.

The 2025 official guidance on employee non-compete restrictions further emphasizes that employers should not impose them on people without access to relevant trade secrets. These special non-compete conditions should not be mistakenly applied to every standalone confidentiality promise.

A China employment contract may contain both types of obligation, but each must be assessed under its own rules.

What Happens If Someone Breaches an NDA?

A breach may expose a party to contractual remedies, damages or trade-secret-related legal consequences, depending on the facts. In an employment relationship, an employer will need evidence of what information was protected, the relevant obligation, the conduct and any claimed loss. A signed agreement by itself does not prove every alleged disclosure or a specific amount of damages.

An employee NDA also should not be used to create unrestricted fixed penalties for every alleged breach. Article 25 of the Labor Contract Law limits when employers may agree that employees will pay contractual penalties; post-employment non-compete penalties are a distinct statutory category. Remedies for actual confidentiality-related loss require a separate legal assessment.

Appropriate precautions before a dispute—such as access controls, limited sharing and documented handover procedures—are often more useful than an excessively broad prohibition drafted after information has already been exposed.

When Would a Business Use a Confidentiality Agreement?

Consider a foreign manufacturer discussing a new component with a potential China supplier. Before sharing unreleased technical drawings and pricing, the parties may enter a mutual NDA that identifies the purpose of the discussions, restricts onward disclosure and establishes how documents must be returned or disposed of.

In employment, the same basic concept may protect software, confidential commercial plans or other sensitive information that staff encounter during their work. It does not replace the labor contract, intellectual-property ownership terms, employee information-security controls or a separate non-compete agreement where one is lawfully justified.

China employers may address confidentiality, intellectual property and non-compete obligations in their employment contracts, but each provision has a different purpose and legal scope.