Employers hiring in Portugal may leverage non-disclosure agreements (NDAs) to protect sensitive company information. However, NDAs must fall within certain parameters to be enforceable. What’s more, per European and Portuguese law, NDAs also do not cover unlawful content, and cannot silence whistleblowers or workers who have experienced workplace harassment or discrimination.
So when are NDAs enforceable in Portugal? And how can you use NDAs to protect your company and global employees? Read on to learn more.
(Note: This guide is for informational purposes, and isn’t intended to provide legal advice. Consult a legal professional for additional guidance.)
What is an NDA?
An NDA is a legally binding contract that establishes a confidential relationship. Typically, it prohibits one or more parties from sharing proprietary or confidential information.
Though NDAs are used in various contexts, NDAs are often used in the workplace to protect trade secrets and private information from competition. In Portugal, trade secrets are not generally known or easily accessible, have commercial value, and have been reasonably kept secret by the person or entity lawfully in control of the information.
Are NDAs enforceable in Portugal?
Yes, NDAs are protected under Portuguese law under the following conditions:
- NDAs can protect trade secrets, defined as protected information that is not generally known or accessible and has commercial value due to being secret. The holder of that trade secret (typically the employer) also must do due diligence to keep that information secret.
- NDAs can also protect intellectual property, business strategies, client information, internal processes, and confidential agreements with third parties.
- For violation of an NDA to constitute “unfair competition,” it requires the existence of said competition.
Manage and run your global workforce through Rippling.
Three things you need to know about NDAs in Portugal
1. There are different types of NDA
In Portugal, as in many other countries, there are two common types of NDAs:
- Mutual NDAs, also known as bilateral or two-way NDAs, are a type of agreement where all parties in the NDA are contractually allowed to share trade secrets, but no one outside the agreement. Mutual NDAs are often part of mergers, acquisitions, and similar kinds of business deals where both parties will be sharing important information.
- Non-mutual NDAs, also known as unilateral NDAs, work one way. In this scenario, the employer is sharing information with the employee or contractor, who agrees to not leak or share sensitive information with anyone else. These types of NDAs are more common in employer-employee relationships and are often signed by a new employee upon hiring.
There are also multilateral agreements, which are similar to bilateral agreements but, in the case that there are more than two parties, commit and protect everyone involved.
2. NDAs should include specific provisions
There’s no one-size-fits-all template—NDAs should be tailored to the business and the protected information. Though an NDA will likely contain a number of clauses, these aspects should be included:
- Name the parties involved. Include the name and role of those who will be sharing and receiving confidential information (i.e. the disclosing party and the receiving party).
- Define “confidential information”. If possible, outline the general scope of information or types of documents covered by the NDA. For example, written information might be considered confidential, while oral information is not. (Note: Information required to be disclosed to the authorities for legal purposes is not in violation of NDAs.)
- Exclusions from confidentiality. Are there cases in which the parties subject to the NDA may disclose confidential information? For example, after the information has been made public, it is typically no longer protected by the NDA. Is the information only restricted for a specific use and, if so, how can it be shared? Can it be disclosed on a need-to-know basis?
- Terms of the agreement. How long does the NDA last? Be clear about the time period. Employment NDAs typically last for the duration of the working relationship, but they can last longer and, in some select cases, can even last in perpetuity.
- Confidentiality obligations. You may also include what lengths the employee must go to in order to keep information secret—for example, shredding paper copies, using secure computers, or using authentication systems for sign-ins.
- What happens after the disclosure of information? Include provisions that outline any injunctions, damages, or other consequences for breaching the NDA. Outline the laws under which this falls and the jurisdiction where a case will take place if a dispute arises. Mention any alternative dispute resolution mechanisms for violations, which can save time and money as opposed to going to court.
3. Portuguese laws also protect trade secrets
Whether or not you decide to use an NDA, several criminal codes protect employers in Portugal if employees misappropriate or share information. These include:
- Article 195 of the Criminal Code. This rule imposes a prison sentence of up to one year or a fine of up to 240 days for those who reveal a secret that they become aware of through their condition, employment, office, profession, or art.
- Article 196 of the Criminal Code. As with article 195, this imposes up to a year imprisonment or a fine of up to 240 days for those who take advantage of a secret relating to the commercial, professional, industrial, or artistic activity of another person or business without consent and, by doing so, damage that person or business. If disclosures of secrets are made to cause damage or if those disclosures are made through the media, there could be imprisonment of up to one year and four days, or a fine of up to 320 days.
- Labor Code. The Labour Code of Portugal obligates employees to be loyal to their employer, primarily by not negotiating on behalf of their competitors or by harmfully disclosing information about their organization, production methods, and business.
When would an employee or contractor sign an NDA?
Typically, employees and contractors in Portugal sign NDAs during onboarding or at the beginning of a new work contract. NDAs may also be included as confidentiality clauses in offer letters or employment contracts.
Frequently asked questions about NDAs in Portugal
Are NDAs enforceable in Portugal?
Yes, NDAs are considered legally binding contracts in Portugal. 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) overseas depends on the specific terms of the agreement, as well as the laws of the country where the NDA is being enforced. Always research the specific laws abroad, and consult a legal professional if you’re unsure about enforceability.
Typically, an NDA that is valid and enforceable in Portugal will also be enforceable in other countries that recognize and enforce foreign judgments. However, that may be impacted by legal systems, cultural norms, and public policy.
What type of information can be covered by an NDA?
Information that's considered confidential or proprietary can be covered by an NDA in Portugal, which includes:
- Trade secrets and proprietary information. This includes things like manufacturing processes, formulas, designs, and technology that are unique to a company and which provide a competitive advantage.
- Financial information, including confidential financial statements, budgets, sales figures, and projections.
- Customer information, such as customer data, purchasing history, preferences, and other personal data.
- Employee information. This can include salaries, job duties, and performance evaluations.
- Business strategies and plans, such as sharing information on expansion plans or any sensitive details about the company’s operations.
- Intellectual property, which can include patents, trademarks, copyrights, and other types of intellectual property. However, note that in the European Union, certain types of IP, including patents and industrial designs, require novelty to be protected.
Any information that's publicly known or part of the public domain cannot be covered by an NDA. NDAs also aren't allowed to prevent whistleblowers from disclosing criminal activity by a company—per European and Portuguese law, whistleblowers are protected against all forms of retaliation.
When should you use an NDA?
Generally speaking, NDAs are used to protect information in situations where it must be shared in confidence. Common situations in which you might use an NDA in Portugal 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 or customer information is shared with an employee or contractor
- During a merger and acquisition
- When access to proprietary or confidential information is given to employees or contractors
Remember: NDAs are legally binding documents that entitle you to recover damages, but NDAs do not guarantee that your information will remain safe. NDAs may be violated. Be diligent about what information is truly required to share with employees, contractors, and other third parties. What’s more, establish good practices around restricting access to documents and maintaining cyber security.
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. Non-disclosure agreements may also be called confidentiality agreements (CAs), confidential disclosure agreements (CDAs), proprietary information agreements (PIAs), or secret agreements (SAs). In Portuguese, a non-disclosure agreement is known as an acordo de não divulgação.
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 an 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.
In general, because non-compete clauses and non-solicitation agreements are seen as a restraint of trade, they can be difficult to enforce in Portugal, where there’s a general prohibition on clauses that limit the freedom to work. Non-compete clauses may be allowed, though post-contractual non-compete clauses are not enforceable except in very specific cases:
- The non-compete must be capped at two years after the employee-employer relationship ends, or three years if the work activity requires a special relationship of trust or if the employee has access to very sensitive information.
- The activity being limited must damage the former employer.
- The former employee must be paid for agreeing to the non-compete. Consideration can take the form of a signing bonus, a promotion, or other benefits.
- The non-compete must be executed in writing. This can be done in an employment contract or termination agreement.
Is an NDA ethical?
Yes—NDAs are generally used to protect employers by preventing contractors and employees from sharing trade secrets and other proprietary information with competitors. However, NDAs do not cover illegal activity and cannot be enforced against whistleblowers, who are protected throughout Europe.
Benefits of NDAs in Portugal
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 rights, 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. Such suits are filed like any other civil lawsuit.
Per Portuguese law, the limits for compensation must be reasonable and proportionate to the disclosure and damages. As outlined earlier, you may wish to include alternative dispute resolution mechanisms (such as arbitration) in the NDA. This can save time and money as opposed to going to court.
Run your global workforce in Portugal with Rippling
Rippling makes it easy to hire and manage your workforce in Portugal and all over the globe
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.