Are NDAs legally binding in Costa Rica? A guide for employers
May 19, 2023
Hiring in Costa Rica can be a complex process. From an offer letter to onboarding your next employee at a global company, the details are many to stay compliant with local laws. One step you should not skip is adding a non-disclosure agreement (NDA) to your employment contract when hiring in Costa Rica.
Non-disclosure agreements help employers protect confidential information and intellectual property or trade secrets. In Costa Rica, the Undisclosed Information Law makes it a crime to disclose confidential information without authorization, but it protects personal data more than companies.
So how do you protect yourself under Costa Rican law? Are NDAs enforceable in Costa Rica? Keep reading about how confidentiality agreements can help your company stay compliant and protected.
What is an NDA?
A non-disclosure agreement (NDA) is a legal contract that prevents parties from disclosing proprietary or confidential information to third parties. NDAs are commonly used to safeguard trade secrets and other confidential information in the workplace, preventing competitors from accessing them. In a work environment, NDAs are signed by employees to prevent the dissemination of the company's confidential information.
In Costa Rica, the employer has the right to terminate a worker if they release confidential information about the company following the 90-day probation period.
Are NDAs enforceable in Costa Rica?
Yes, the Republic of Costa Rica recognizes NDAs, and are enforceable in the country.
For an NDA to be valid in Costa Rica, the agreement must be in writing, clearly identifying the parties involved and the confidential information in question. It needs to be signed by the parties without coercion.
You can generate NDAs, offer letters, and any other documents you need, then easily send them out for e-signature—all through Rippling.
(Note: our guide is for informational purposes and isn’t intended to provide legal advice.)
Three things you need to know about NDAs in Costa Rica
In Central America, many countries have some protection surrounding intellectual property and confidential information, but it’s often not enough to protect your company.
- Data protection laws. Costa Rica is one of many countries in Central America that has data protection laws. The laws cover the fundamental right of individuals to decide what personal information can be shared publicly. An NDA can protect your company and help you stay compliant with safeguarding both customer and employee data.
- A written NDA must be specific. A well-written non-disclosure agreement must expressly state what is confidential, what constitutes a waiver on sharing certain information, and the time frame in which such information cannot be disclosed.
- Required consent from both parties. An NDA is only valid when the parties signing the agreement entered into it voluntarily and without coercion.
When would an employee or contractor sign an NDA?
The employee must sign the NDA during onboarding and before any confidential information is shared during their first days at the company. It’s recommended to include it with the employment contract or offer letter.
Frequently asked questions about NDAs in Costa Rica
Are NDAs enforceable in Costa Rica?
Yes, Costa Rica enforces NDAs in various business settings, including employment relationships. Confidentiality agreements are considered legally binding contracts, and the Costa Rican civil court will handle any contract disputes following a lawsuit that fits the legal requirements.
Are NDAs enforceable overseas?
Overseas enforcement of NDAs can vary depending on the jurisdiction and laws involved. The NDA should specify the jurisdiction and governing law to ensure proper enforcement before initial signing.
Typically, parties involved agree on a single jurisdiction and governing law for the NDA in question. Lawyers will then proceed to enforce the NDA according to the applicable laws.
What information can be covered by an NDA?
A well-written NDA can help employees understand expectations about what’s confidential and what consequences they will face if they breach the agreement. An NDA can cover the following:
- Trade secrets. In Costa Rica, a trade secret constitutes confidential information with commercial value, unavailable in the public domain, or the owner has a reasonable reason to keep it secret.
- Customer data information. Under the Undisclosed Information Law, you must remain compliant in protecting personal data. This includes personal and contact information.
- Intellectual property. Protecting intellectual property rights includes patents, copyrights, and any other sensitive intellectual property owned by the company.
- Employee data. Under the Undisclosed Information Law, employers must protect employees' private lives, including salaries and other sensitive data.
- Business strategy includes financial information, marketing details, and any other information that maximizes the company’s protection against unfair competition.
An NDA cannot protect public domain information since it’s already accessible to the public and competitors. However, whistleblowers are not prevented from reporting fraud by the NDA as long as it is reported in good faith.
When should you use an NDA?
In Costa Rica, make sure the NDA is not too broad and remains within the country's relevant legal provisions. Here's when you should use one, but not to limited to:
- When hiring employees and contractors abroad to protect your intellectual property.
- When seeking new investment and needing to share trade secrets during a presentation.
- When sensitive customer information is shared with employees and contractors.
- When entering a new business partnership, protect all parts of the company.
- When onboarding a new vendor, prevent unauthorized information from being shared.
- When starting a conversation about financial information for a potential business agreement.
Rippling makes it simple to create and send out an NDA as part of a job offer package.
Is an NDA the same as a confidentiality agreement?
Yes—they are all the same. A non-disclosure agreement can also be referred to as a confidentiality agreement or NDA.
Is an NDA the same as a non-compete agreement?
No, a non-disclosure agreement is not the same as a non-compete agreement.
A non-disclosure agreement is a legally binding contract between two parties or more that clearly communicates what subject matter as it relates to the company is confidential. NDAs should be signed before work starts to protect the company's intellectual property rights or other sensitive information before they have full access.
A non-compete agreement specifies that the employee cannot work for a competitor after quitting for a certain period, usually up to two years. In Costa Rica, the employer must compensate the employee for the entirety of the non-compete period by law. The agreement must also include employee compensation details to be paid during the non-compete period.
Both agreements protect the company's interests in different ways.
Benefits of confidentiality in Costa Rica
An NDA helps protect your company's intellectual property and trade secrets, which is especially important when managing a global workforce. A non-disclosure agreement is in place to prevent the sharing of confidential information which could harm your company's reputation and allow competitors to access your overall business strategy.
An NDA can also help keep proprietary information confidential, reduce the risk of unauthorized use of intellectual property, protect customer data, and provide legal recourse in case of a contract breach.
What happens if an NDA is breached?
For a global company, it is crucial to specify the location for dispute resolution, arbitration, and jurisdiction in writing in case the NDA is violated. The employer can pursue legal action and seek damages from the employee that breached the contract.
After the breach of contract, find a local law firm that understands the legal framework within Costa Rica after the incident in case of non-compliance with the NDA. Legal procedures will vary depending on the circumstances and case-by-case basis.
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Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.