Many employers hiring in Vilnius and elsewhere in Lithuania rely on non-disclosure agreements (or NDAs) to protect sensitive company information.
In some countries, NDAs are facing increased scrutiny and, if you’re considering hiring in Lithuania, you may have a number of questions: Are NDAs enforceable in Lithuania and the European Union? How can you use NDAs to protect your company’s confidential information, trade secrets, and global employees? Read on to learn more (note: our guide is for informational purposes, and isn’t intended to provide legal advice).
What is an NDA?
A non-disclosure agreement (NDA) is a type of legal contract that prevents the parties from disclosing confidential or proprietary information to competitors.
In Lithuania, the employer and employee (or natural person) can sign an NDA that restricts the employee from sharing specific types of information, like trade secrets, that they acquired while working for the company. NDAs usually cover the obligation to use confidential information within the context of the agreement. NDAs protect both parties and aid in dispute resolution (including arbitration, if applicable).
Are NDAs enforceable in Lithuania?
Yes—Under Lithuanian law, NDAs are enforceable. However, there are a few important caveats:
- The NDA must be in writing.
- The legal persons (parties) must be identified.
- The obligations of the parties must be specified.
- The time limits of the contract must be specified.
- Details of what is and isn’t covered must be included.
- An explanation of what the consequences of a breach are.
- Identify the laws and jurisdiction pertaining to the agreement.
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Three things you need to know about NDAs in Lithuania
1. There is a single type of NDA used in Lithuania
In Lithuania, standard NDAs are used in cases where confidential information is shared. NDAs allow the disclosing party to seek compensation for breaches of the agreement. Letters of intent (LOIs) are sometimes used for mergers and acquisitions.
2. There are essential components to make NDAs enforceable
These are the things that an NDA should include to be comprehensive and enforceable:
- Clear indication of the parties involved. The non-disclosure agreement (NDA) should clearly identify the legal entities involved, including their respective names and roles. This includes specifying the disclosing party, who will be sharing sensitive information, and the receiving party, who will be granted access to such information.
- Clear definition of confidential information. This should include the general topic of information covered by the NDA, as well as the scope of information that's covered. In Lithuania, the information must be stated in detail. The NDA should also define how confidential information is shared; for example, is written information considered confidential but oral information is not?
- Exceptions to the agreement. If there are any cases when parties in the NDA are allowed to disclose confidential information (for example, after it's been made public or for an audit), those should be included in the contract.
- Terms of the agreement. How long does the NDA last? Employment NDAs typically last for the duration of the employment relationship, but they can last longer.
- Data obligations. How the confidential information will be protected.
- Liability: What will happen if the NDA is breached? It's a good idea to include provisions that outline any injunctions, damages, or other contractual sanctions for breaching the NDA.
- Applicable law. You (or a law firm) should review the laws of the Republic of Lithuania and additional information used to create and format the NDA. It should be checked for legal compliance.
3. There are three legal requirements for NDAs in Lithuania:
For NDAs to be enforceable in Lithuania, they must be:
- Reasonable. The NDA cannot place an excessive burden on someone not to share information.
- Specific. The NDA needs to clearly define the type of information that's confidential and the time frame during which it cannot be disclosed.
- Not outside the public interest. Certain information can't be covered by an NDA. For example, a business can't oblige employees to sign an NDA to prevent them from disclosing criminal activity by the company.
When would an employee or contractor sign an NDA?
As early as possible. It's common for employees and contractors in Lithuania to sign NDAs during their onboarding or when they begin a new work contract. An NDA may also be added as part of a new hire's offer letter or employment contract or as a separate agreement.
Frequently asked questions about NDAs in Lithuania
Are NDAs enforceable in Lithuania?
By law, an NDA is considered a legally binding contract in Lithuania. Lithuanian courts have historically upheld them as long as they meet the legal requirements above. It's important to note that employment and other applicable laws and regulations that affect NDAs can change, altering the ways they can be used by employers. It’s a good idea to check for any recent amendments.
Are NDAs enforceable in other countries?
The enforceability of a Lithuanian non-disclosure agreement (NDA) outside of Lithuania depends on details like the terms of the agreement and the national laws of the country where the NDA is being enforced. Note that certain privacy regulations are standardized across European Union (EU) member states.
In general, an NDA that is valid and enforceable in Lithuania may also be enforceable in other countries, particularly in countries that recognize and enforce foreign judgments. However, many factors can affect the enforceability of an NDA in a foreign jurisdiction, such as differences in legal systems, cultural norms, and public policy considerations. Legal advice from an expert familiar with the laws in the country you want the NDA enforced is highly advisable.
What information can be covered by an NDA?
In Lithuania, confidential commercial information, commercial secrets, and data protection regulations may be covered in an NDA. This includes:
- Trade secrets and proprietary information. This can include things like manufacturing processes, formulas, designs, and technology that are unique to a company and provide a competitive advantage.
- Financial information, including confidential financial statements, budgets, sales figures, and projections.
- Customer information, including personal data like customer contact information, purchasing history, and preferences.
- Employee information. This can include information about employees, such as their salaries, job duties, and performance evaluations.
- Intellectual property, which can include patents, trademarks, copyrights, and other types of intellectual property that are owned by a company.
Any information that's publicly known or part of the public domain isn’t covered by an NDA. Employees cannot be prevented from disclosing criminal activity committed by a company through the use of NDAs. As per the Lithuanian Supreme Court, some confidential information is covered by the civil code.
When should you use an NDA?
Common situations to use an NDA in Lithuania include:
- When an invention or business idea is being presented to a potential partner, investor, or employee.
- When financial information is being shared with a potential partner or investor.
- When a new product or technology is being shown to a prospective buyer.
- When sensitive company information is shared with an employee or contractor.
- When access to proprietary or confidential information is given to employees or contractors.
- When customer information is shared with employees or contractors.
- When conducting research, you need to share sensitive information with a research company.
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Is an NDA the same as a confidentiality agreement?
Yes. In Lithuania, an NDA and a confidentiality agreement are the same things, and the terms are used interchangeably.
Is an NDA the same as a non-compete agreement?
No. An NDA is different from a non-compete agreement. In Lithuania, a non-compete agreement is a specific type of agreement found in business or employment contracts. It can be part of the employment contract or a separate agreement. It restricts employees or contractors from engaging in activities related to their position if these activities are in direct competition with the employer.
The agreement is valid until the end of the term of the employment and compensation of at least 40% of the employee’s average remuneration must be paid. A non-compete agreement can remain in effect even after the termination of the employment relationship—up to two years under the Lithuanian Labour Code.
Is an NDA ethical?
Yes—NDAs are commonly employed to safeguard employers by restricting contractors and employees from divulging trade secrets and other proprietary information to competitors.
Benefits of NDAs in Lithuania
An NDA can help protect employers' confidential information, intellectual property rights, and proprietary assets, which can be crucial to a company's success in today's highly competitive business environment. Benefits include:
- Legal protection for confidential business information, trade secrets, and other proprietary information that is disclosed to another party.
- Prevention of unauthorized disclosure of confidential information and other subject matter by requiring the recipient to keep the information confidential and not to disclose it to third parties.
- Legal recourse to seek damages and other remedies under the provisions of this agreement if a recipient of confidential information breaches the NDA.
- Protection of intellectual property, such as patents, trademarks, and copyrights.
What happens if an NDA is breached?
The regulatory 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 in Lithuania. But an NDA is a legally binding contract, so any breach means legal action under the Lithuanian Labour Code can be taken against the violating party.
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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.