Are NDAs legally binding in Mexico? A guide for employers

Many global businesses rely on non-disclosure agreements (or NDAs) to protect sensitive company information. But when hiring in Mexico, can you still use an NDA? Is it legal and enforceable?

An NDA can be a powerful tool that protects both your company and its global employees—when used properly. Above all else, an NDA must comply with local laws, which can be different in different countries. So before you draft an NDA for your first hire in Mexico, read this guide to find out what you need to know (note: our guide is for informational purposes, and isn’t intended to provide legal advice).

What is an NDA?

An NDA, or Non-Disclosure Agreement, is a legal contract between two or more parties that establishes confidentiality obligations regarding certain information shared between them. The purpose of an NDA is to protect sensitive or proprietary information from being disclosed to third parties or the public.

By signing an NDA, the parties involved agree not to disclose or share specified confidential information with anyone who is not directly involved in the agreement. Confidential information can include trade secrets, business information, financial data, customer lists, technical designs, or any other information that the parties consider valuable and confidential.

NDAs are commonly used in business transactions, partnerships, employment relationships, or any situation where sensitive information needs to be shared. They help safeguard proprietary information, maintain a competitive edge, and provide legal recourse if the terms of the agreement are violated.

Are NDAs enforceable in Mexico?

The short answer is yes—Mexican courts have, for the most part, held up NDAs as enforceable. But their enforceability can depend on different factors and circumstances:

• NDAs are typically governed by Mexican contract law. The Mexican Civil Code provides the legal basis for contracts, including confidentiality agreements.
• Like any contract, an NDA requires the mutual consent of the parties involved. There must be a clear offer and acceptance, and consideration (something of value exchanged) to support the agreement. It is common for NDAs to include a clause specifying the consideration, such as access to confidential information or the opportunity to engage in a business relationship.

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Three things you need to know about NDAs in Mexico

1. There are different types of NDA

In Mexico, two types of NDAs are common in business relationships:

• Mutual NDAs, also known as bilateral or two-way NDAs, are a type of agreement where all parties involved agree to share information, but no one outside of the agreement. These types of NDAs are common in mergers, acquisitions, and similar kinds of business deals.
• Non-mutual NDAs, also known as unilateral NDAs, are a type of agreement where only one party is obligated to protect and keep confidential the proprietary or sensitive information shared, while the other party is not bound by similar confidentiality obligations. These types of NDAs are common in employer-employee relationships and may be included as a clause in an employment agreement.

2. Some types of confidential information are protected by Mexican law

In Mexico, there are certain legal protections in place to help safeguard confidential information. For example, the Industrial Property Law (Ley de la Propiedad Industrial) protects trade secrets and provides legal remedies for companies whose confidential intellectual property is disclosed without their consent.

However, Mexico's laws don't offer comprehensive protection—that's why you still need to include an NDA in your onboarding for Mexican employees.

3. Despite legal protections, you still need an NDA

Mexico's laws are a starting point, but an NDA gives your company and its employees more specific, comprehensive protection against breaches of confidential information. As a general rule, an NDA should be as specific as possible, and should include at least the below information:

• The parties involved. Include their names, roles, who will be sharing information, who will be receiving information, and anyone else they can share such information with under the agreement.
• Definition of confidential information. Include the general topic and scope of information considered confidential under the NDA.
• Exclusions from confidentiality, if there are any cases in which the parties in the NDA are allowed to disclose confidential information (for example, after it becomes public).
• Term of the agreement. Most employment NDAs last for the duration of the employment relationship, but some can last longer. Specify that in this clause.
• What happens if the NDA is breached. Be specific about dispute resolution that may be required (like arbitration), or other consequences (like damages) that may be sought from the violating party.

When would an employee or contractor sign an NDA?

In Mexico, it's common for employees or contractors to sign an NDA during onboarding at a new company or when they start a new work contract. A non-disclosure clause may also be included in their offer letter or employment contract.

Frequently asked questions about NDAs in Mexico

Are NDAs enforceable in Mexico?

Yes, an NDA is a legally binding contract that's enforceable in Mexico. It's important to stay up-to-date on employment laws and other regulations that could impact NDAs since the laws around them can change over time.

Are NDAs enforceable overseas?

The enforceability of a cross-border NDA can vary depending on the laws and regulations of the countries involved. While an NDA from Mexico may offer some level of protection in other countries, its enforceability can be subject to local legal considerations and requirements.

In general, whether an NDA can be enforced overseas depends on the choice of law, jurisdiction, and compatibility with local laws. A country that recognizes foreign judgments may be more likely to recognize the validity of a foreign NDA.

What information can be covered by an NDA?

An NDA in Mexico can cover a wide range of information that is considered confidential or proprietary. The specific information that can be covered by an NDA may vary depending on the agreement's terms and the needs of the parties involved. Here are some examples of the types of information that are commonly covered by NDAs in Mexico:

• Trade secrets. NDAs often include provisions to protect trade secrets, which can encompass valuable and non-public information such as manufacturing processes, formulas, technical know-how, customer lists, marketing strategies, or financial data.
• Intellectual property. Confidentiality obligations can extend to protect various forms of intellectual property, including inventions, patents, designs, copyrights, and trademarks.
• Business plans and strategies. Information related to business plans, marketing strategies, product development plans, financial projections, and expansion plans can be considered confidential and covered by an NDA.
• Client or customer information. NDAs can include provisions to protect sensitive client or customer information, such as personal data, contact details, purchasing history, or other proprietary information related to the parties' business relationships.
• Technical information. NDAs can cover technical specifications, drawings, schematics, software code, algorithms, research data, or other technical information that is not publicly available.
• Financial information. Confidential financial data, including financial statements, budgets, pricing structures, revenue figures, or cost information, can be protected under an NDA.

Some information cannot be covered by an NDA, including:

• Anything already publicly known
• Anything in the public domain or interest
• Whistleblower information pertaining to illegal activity by a company
• Personal data belonging to the parties in the NDA

When should you use an NDA?

An NDA can be used in any situation where it is necessary to protect confidential information. Here are some common scenarios in which an NDA may be appropriate:

• When entering into a partnership or collaboration with another individual or company, an NDA can be used to protect sensitive information shared between the parties, such as trade secrets, proprietary technology, business plans, or customer lists.
• When entering into a relationship with an employee or contractor who will have access to confidential information as part of their work. This helps ensure that sensitive company information remains confidential and is not disclosed or misused by the individuals involved.
• During merger or acquisition negotiations, an NDA can be used to facilitate the sharing of confidential financial, operational, and strategic information between the parties involved, protecting sensitive data during the due diligence process.
• When engaging in technology or software development projects with external parties, an NDA can safeguard proprietary technology, source code, algorithms, or other confidential information related to the project.
• To protect business plans, financial projections, intellectual property, or any other sensitive information shared with potential investors.

Is an NDA the same as a confidentiality agreement?

Yes. Non-disclosure agreements may also be called confidentiality agreements (CAs), confidential disclosure agreements (CDAs), proprietary information agreements (PIAs), or secret agreements or secrecy agreements (SAs).

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

No, an NDA is not the same as a non-compete agreement (also called a non-competition or non-solicitation agreement) in Mexico. While both types of agreements are often used in business settings, they serve different purposes and have distinct legal implications.

An NDA is a contract that establishes confidentiality obligations between parties. Its primary purpose is to protect sensitive or proprietary information from being disclosed to third parties or the public. NDAs restrict the recipient from sharing or using confidential information for unauthorized purposes but typically do not impose restrictions on competition or future employment.

A non-compete agreement is a contractual provision that restricts a former employee's ability to compete with a company or engage in certain activities that may be considered competitive for a specified period of time and within a specific geographic area. Non-compete agreements aim to prevent individuals from competing directly with their former employer or using proprietary information or trade secrets to gain an unfair advantage in the market.

Non-compete agreements are against the Mexican Constitution and can be difficult, if not impossible, to enforce in the country.

Is an NDA ethical?

For the most part, yes—NDAs are typically meant to protect employers by preventing employees and contractors from sharing confidential information (like trade secrets) with competitors. When used in that context, they are ethical.

However, there have been cases where NDAs have been used more dubiously—to impede freedom of speech, silence whistleblowers, and prevent victims of harassment and discrimination from speaking out after a settlement agreement, for example. In cases like these, NDAs are not ethical and are receiving increased scrutiny in many countries around the world.

Benefits of NDAs in Mexico

Here are some key advantages of using an NDA:

• The primary benefit of an NDA is to safeguard sensitive and confidential information. NDAs establish legally binding obligations that prevent the unauthorized disclosure, use, or dissemination of proprietary knowledge, trade secrets, customer lists, financial data, or other valuable information. This protection helps maintain a competitive advantage and preserves the integrity and exclusivity of confidential information.
• NDAs can foster trust and facilitate open communication in business relationships. By establishing confidentiality obligations, parties can share information more freely, enabling collaborations, partnerships, mergers, or other cooperative endeavors. The NDA provides reassurance that the shared information will be kept confidential, encouraging a more productive exchange of ideas and information.
• NDAs help protect intellectual property (IP) rights. By defining the scope of confidential information, including inventions, trade secrets, copyrights, or patents, an NDA reinforces ownership rights and deters unauthorized use or infringement by the receiving party. This is particularly important in technology-driven industries or sectors where IP assets play a crucial role.
• NDAs provide a legal framework for enforcing confidentiality obligations. In the event of a breach, the injured party can seek legal remedies, such as injunctive relief to halt the unauthorized disclosure or use of confidential information, as well as pursue monetary damages resulting from the breach. The NDA serves as evidence of the parties intent and provides a basis for legal action.
• NDAs can help businesses maintain a competitive edge by safeguarding their confidential information from competitors. By keeping proprietary knowledge, strategies, or trade secrets confidential, businesses can differentiate themselves in the market and protect their unique value propositions, pricing strategies, or operational methods.

What happens if an NDA is breached?

If an NDA (Non-Disclosure Agreement) is breached in Mexico, the consequences and actions that can be taken depend on the specific terms of the NDA, applicable laws, and the severity of the breach. Potential outcomes could include:

• Legal remedies
• Damages
• Injunctive relief
• Termination

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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.