Are NDAs legally binding in the Philippines? A guide for employers

If you’re hiring in the Republic of the Philippines (or anywhere else globally), you’re likely curious about guardrails for protecting sensitive information. Employers often rely on non-disclosure agreements (or NDAs) to ensure confidentiality of trade secrets and other proprietary information—both during an employee’s tenure and after they’ve taken on a new role elsewhere.

But in the Philippines, an NDA won’t always withstand regulatory scrutiny. Government officials disclosed sealed information about the price of vaccines that was covered under an NDA earlier this year.

Read on to learn how NDAs are used in the Philippines, whether they’re legally enforceable, and the most important components a Philippine NDA should have to ensure your global workforce’s information is protected.

What is an NDA?

A non-disclosure agreement (NDA) is a legal contract that prohibits one or more parties from sharing confidential information with third-party people or entities.

In the Philippines, NDAs are often used to protect a company’s confidential information outside of the workplace and after an employee leaves and finds a new employer, including:

• Trade secrets
• Proprietary technology
• Business plans, strategies, and tactics
• Sensitive personal information protected by the Data Privacy Act
• Any information not intended for public consumption

NDAs are legally binding in the Philippines, so long as they comply with provisions in the country’s Civil Code, Intellectual Property Code, and Electronic Commerce Act.

Are NDAs enforceable in the Philippines?

Yes, NDAs are enforceable by Philippine courts. To ensure a confidentiality agreement holds up to legal scrutiny, it should include the full names of the consenting parties, a thorough definition of the information that can’t be disclosed, situations where the NDA is nullified, and provisions for maintaining confidentiality after an employee is terminated.

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Two things you need to know about NDAs in the Philippines

1. There are different types of NDAs

In the Philippines, there are two types of NDAs you're most likely to encounter:

• Mutual NDAs, also known in the Philippines as Business NDAs, are a type of agreement where all parties in the NDA are contractually bound to share certain information with one another, but no one outside the agreement. Mutual NDAs are often part of mergers, acquisitions, negotiations, and similar kinds of deals involving the exchange of business information.
• Non-mutual NDAs, also known in the Philippines as employee confidentiality agreements, work one way, requiring one party in the agreement to receive sensitive information without leaking or sharing it with anyone else. These types of NDAs are more common in employer-employee business relationships; an employer assigns non-mutual NDAs to a new employee when hired, and it often covers intellectual property rights and inventions.

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. This should include their names and roles, including who will be sharing and receiving confidential information (i.e. the consent of the disclosing party and the receiving party) and who they will be sharing such information with.
• 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. It should also define how such confidential information is shared; for example, is written information considered confidential but oral information is not? This section generally starts with “for the purposes of this agreement…”
• Exclusions from confidentiality. If there are any cases when parties in the NDA are allowed to disclose confidential information (for example, after it's been made public), those should be included in the contract.
• Terms of the agreement. How long does the NDA last? For employment NDAs, they typically last for the duration of the working relationship, but they can last longer. You should always stipulate a time period.
• What will happen if the NDA is breached. It's a good idea to include provisions that outline any injunctions, damages, or other consequences for breaching the NDA.

3. In the Philippines, NDAs should never run afoul of the public interest

Philippine authorities may negate the terms of an NDA. In early 2023, for instance, the Senate Blue Ribbon Committee got COVID-19 vaccine manufacturers to disclose price information originally protected in an NDA, in order to curb waste.

NDAs also won’t exempt employers from criminal activity or workplace misconduct.

When would an employee or contractor sign an NDA?

It's common for employees and contractors in the Philippines to sign NDAs during their onboarding or when they start a new work contract. An NDA may also be included as a confidentiality clause in a new hire's offer letter or employment contract.

Frequently asked questions about NDAs in the Philippines

Are NDAs enforceable in the Philippines?

By law, an NDA is considered a legally binding contract in the Philippines. Courts have historically upheld them as enforceable legal documents so long as they comply with other laws of the Philippines.

However, it's important to note that employment laws and other regulations that affect NDAs can change.

Are NDAs enforceable overseas?

The enforceability of a non-disclosure agreement (NDA) in the Philippines overseas depends on the specific terms of the agreement, as well as the laws of the country where the NDA is being enforced.

In general, an NDA that is valid and enforceable in the Philippines may also be enforceable overseas, particularly in countries that recognize and enforce foreign judgments. However, there are many factors that can affect the enforceability of an NDA in a foreign jurisdiction, such as differences in legal systems, cultural norms, and public policy considerations.

What information can be covered by an NDA?

In the Philippines, information that's considered confidential or proprietary can be covered by 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, 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 rights, 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 cannot be covered by an NDA. You can also generally disclose confidential information to police authorities and in court.

When should you use an NDA?

Common situations to use an NDA in the Philippines 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

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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 (SAs).

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

No. An NDA is different from a non-compete clause or non-solicitation agreement. While both types of agreements are used to protect a company's interests, they serve different purposes.

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.

The purpose of a non-compete agreement is to prevent a former employee from taking knowledge, skills, and business opportunities acquired during employment and using them to compete with your company.

Benefits of NDAs in the Philippines

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 confidential information, trade secrets, and other proprietary information that is disclosed to another party
• Prevention of unauthorized disclosure of confidential information 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 terms of the 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 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. The NDA should have a "breach of this agreement” clause that outlines expected consequences.

In the Philippines, it’s important to follow due process when trying to enforce an NDA via the court system. Before filing a complaint, make sure you have strong evidence that an NDA was violated, and make sure you give the receiving party a detailed explanation of why you thought their actions constituted an involuntary disclosure.

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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.