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Differences between a Confidentiality Agreement and a NCA
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1. Nature of the liability.The function of confidentiality is to establish a statutory obligation based on direct provisions of the law, or a collateral obligation of the labor contract. The impacted employee is obliged to maintain said confidentiality regardless of whether he/she and his/her employer have signed a confidentiality agreement or not.However, the NCA is a contractual obligation based on the mutual agreement between the employer and the employee. No employee is required to abide by the obligation not to compete directly with the employer unless an NCA is in force.
2. Focus of the liability.Mainly speaking, a confidentiality obligation demands that the employee not divulge its employer’s trade secrets, meaning “not to disclose,” while an NCA requires that an employee not work with any company which directly competes with his previous employer; neither may said employee start a competitive business himself/herself.
4. Liability for Breaching AgreementThe employer shall not specify any penalty for breaching the confidentiality agreement. However, the employer may ask that the employee compensate for any actual losses he/she causes by breaching the Confidentiality Agreement. As such, it is very important for the employer to specify in the Confidentiality Agreement how its loss/es will be calculated in the event of any breaching.However, an employer may specify liquidated damages in an NCA. If any employee breaches his/her NCA, the employer can directly require employee to pay the specified liquidated damages without the burden of having to prove how much damage the employee has caused.
5. Condition for Observation of the Agreement.The Purpose of confidentiality is to impose a statutory obligation for the employee. Performance of this obligation is not contingent on the condition that his employer pays any confidentiality fee. In other words, the employee should keep his employer’s business secrets without any premise or condition.However, the employer is required to pay the employee a certain amount of remuneration while asking the employee to observe the NCA. Usually, the amount of the remuneration is 30% of the employee’s salary before the end of the labor contract or no less than the minimum local average salary.Though both are measures intended to protect employers from the loss of competitive advantage by virtue of their trade secrets being made public, there are five differences between Confidentiality Agreement and a Competition Restriction Agreement.
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