Are NDAs legally binding in Germany? A guide for employers

When you’re hiring in Germany, whether your workforce will be comprised of independent contractors, full-time employees, or both, you likely intend to rely on non-disclosure agreements (NDAs) to protect sensitive information that could harm your company should it become public.

As elsewhere in the world, including Canada, France, and the UK, German lawmakers have kept a close eye on employers who intend to misuse non-disclosure agreements to silence whistleblowers. We’ll discuss this in further detail later.

All of this has employers asking: Can you enforce an NDA in Germany? And, how can you use non-disclosure agreements to protect your company and its employees? This guide will answer these and other questions.

(Note: This guide is for informational purposes only and is not intended to provide legal advice.)

What is an NDA?

Although the best way to ensure sensitive information remains confidential is to keep it to yourself, at times, you need to disclose it to others. You might find yourself in this situation when you’re negotiating with a potential new partner, bringing an attorney or financial advisor on board, or hiring a new employee.

The party you share the information with, be it trade secrets or intellectual property, agrees not to share the info with any third parties for a specified amount of time by signing an NDA. This is a legally binding contract that protects confidential information. If it’s breached and confidential information is shared with a third party, the violating party will face serious legal consequences.

Something else to keep in mind: In 2022, the German Bundestag—or federal parliament—passed the German Whistleblower act at the end of 2022. While it hasn’t yet been approved, the most important thing for employers to keep in mind, especially those with between 50 and 249 employees, is that whistleblowers are protected from retaliation by their employers. Laws like these are becoming increasingly common throughout European Union countries and European nations who are not EU members alike.

Are NDAs enforceable in Germany?

Yes, NDAs are enforceable in Germany. German courts have a surprisingly straightforward system for NDAs (considering they’re a nation well known for having a complex bureaucracy). Here are a few more pieces of information you should be aware of:

• The rules surrounding NDAs are different if you’re negotiating with a potential business partner than signing a non-disclosure agreement with an employee. In the case of the former, certain confidential information is expected to be kept between the two parties even though there is no formal, written NDA. The same is not true for employer-employee relationships.
• The German government recently passed legislation that prevents whistleblowers from being retaliated against by their former or current employer. Furthermore, bullying, stalking, sexual harassment, and other forms of violent and serious behavior will not be tolerated in the workplace.

With Rippling, you can manage HR, IT, and Finance in one unified system—and automate your global compliance work. See Rippling.

3 things you need to know about German non-disclosure agreements

1. There are different types of NDAs

There are two different types of confidentiality agreements in Germany:

• Bilateral NDAs: These are used when both parties are disclosing sensitive information to each other. You might, for example, sign a bilateral NDA when you’re in talks with another business and the discussion would involve sharing ideas on both sides. With a bilateral NDA, neither party is allowed to disclose any of the confidential information without legal repercussions.
• Unilateral NDAs: Unilateral NDAs are utilized when you are the sole disclosing party. This type is frequently used in employer-employee relationships where the agreement works one way, requiring only one party in the agreement to protect sensitive information without leaking or sharing it with anyone else. Unilateral NDAs are frequently signed once the employee receives their employment contract.

2. There are essential components to make confidentiality agreements enforceable

German law is pretty simple when it comes to what should be included in an NDA to protect confidential information, such as intellectual property:

• Who are the parties involved? The names and roles of the parties involved should be clearly written down in the NDA. It should also be clear whether or not they will be sharing or receiving confidential information and who they are legally allowed to share it with.
• What exactly is considered “confidential”? This is a crucial component: You need to be extremely clear about the definition of what’s included in the confidentiality agreement, including trade secrets, business information, and so on.
• How long will the NDA last? It’s important to note how long the NDA is enforceable. Commonly, in Germany, NDAs are enforceable for about three years.
• What’s included in the exclusion clause? The exclusion clause excludes certain information from the confidentiality agreement. Make sure you clearly indicate what is not covered under the NDA.

3. The laws surrounding trade secrets are vague

In Germany, there is no specific legislative definition as to what constitutes a “trade secret.” Instead, trade secrets are vaguely defined as specific know-how that a company keeps secret to ensure their business remains competitive. Furthermore, companies must prove that, were the trade secrets to become public, it would harm their business.

When would an employee or contractor sign a non-disclosure agreement?

Usually, German employees and independent contractors sign NDAs before they become privy to business secrets. This might be before they start the onboarding process, when they begin a new employment contract, or when they receive an offer letter from their new employer. NDAs are frequently included as confidentiality clauses in the latter.

Frequently asked questions about NDAs in Germany

Are NDAs enforceable in Germany?

Yes. NDAs are enforceable in Germany so long as they are used to protect business secrets and other types of confidential information. Remember: According to German law, non-disclosure agreements cannot be used to silence whistleblowers.

Are confidentiality agreements enforceable overseas?

If you and your employee are located in different countries, you may be wondering if the NDA you both sign will be enforceable overseas in the event of a legal dispute. This depends entirely on the specific terms of the agreement and the laws of the country where the NDA is being enforced.

To avoid confusion, it’s best for you and the employee to agree on the legal system and jurisdiction of the country that will govern the regulations of the NDA and handle any legal issues before the confidentiality agreement is signed. If you have any questions, consult a law firm and get legal advice before you move forward.

What information can be covered by an NDA?

Business information that is considered either proprietary or confidential can be included in the NDA. Make sure you are specific about exactly what sensitive information you’d like to include in the agreement.

This includes, but is not limited to:

• Financial information. This refers to budgets, sales figures, cash flow forecasting and projects, and so on.
• Trade secrets and proprietary information. Such information can include company-specific know-how, technology that’s unique to the company, designs, and other ideas that will help the company be competitive.
• Customer information. The contact information of your customers, as well as their buying preferences and purchasing histories, and other such information is confidential.
• Employee information. German privacy laws are extremely strict when it comes to the sharing and storing of employee information, such as their contact info and salaries. Employees are entitled to provide this information with their consent and to know exactly how it will be stored and who—if anyone—this might be shared with.
• Intellectual property. The confidentiality measures German laws have put into place protect the receiving party from revealing patents, trademarks, copyrights, and other intellectual property the company owns from being shared with third parties.

Finally, NDAs aren't allowed to prevent whistleblowers from disclosing criminal activity by a company.

When should you use an NDA?

You should use an NDA in Germany when:

• You’re seeking legal advice that requires you to share ideas or other sensitive information with a law firm
• You’re sharing an invention, business idea, financial information, customer information, or sensitive company information with investors, partners, and/or employees
• When a new product or technology is being shown to a prospective buyer
• When access to proprietary or confidential information is given to employees or contractors

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. NDAs and confidentiality agreements all refer to the same thing.

Is an NDA the same as a non-compete agreement?

No. A non-compete agreement is a contractual agreement between an employer and employee that restricts the employee from engaging in certain competitive activities for a specified period of time after leaving the company.

German employers are required to pay 50% of the base salary, bonuses, and other remuneration the worker would have received while the non-compete agreement is in effect.

Benefits of NDAs in Germany

An NDA can help protect employers' confidential information and proprietary assets, which can be crucial to a company's success in today's highly competitive business environment. Benefits include: Legal protection for a company in the event business secrets, including confidential information, intellectual property, and proprietary information is disclosed to a third party. Since NDAs are a legally binding contract, the employer has legal recourse to seek damages and other remedies in the event of a breach.

What happens if an NDA is breached?

The penalties for breaching an NDA can vary, depending on the severity of the breach, what penalties are outlined in the NDA, and whether the breach violated any laws. But an NDA is a legally binding contract, so any breach means legal action can be taken against the violating party.

Run your global workforce in Germany with Rippling

With Rippling, you can onboard employees and contractors in Germany in just 90 seconds. ​​Generate NDAs, offer letters, and any other documents you need, then easily send them out for e-signature.

Plus, you can pay all of your employees and contractors in Germany and around the world, without waiting on transfers or currency conversion.

Rippling allows you to manage HR, IT, and Finance in one unified system—and automate your global compliance work. See Rippling.

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.