Non-Disclosure Agreement and It’s essentials

Nevin Clinton,Flywork.io TeamFlywork.io. 

    A non-disclosure agreement (hereinafter referred to as NDA) is an agreement where the parties agree to not disclose content or the information in the agreement. Such agreements can be entered into between two companies, individuals, an individual and a company, and so on. NDAs are customary around the world when information is required to be kept confidential. In India as well, the agreement is quite common. It is governed by the Indian Contract Act, 1872 here and such an agreement becomes valid and enforceable when stamped. 

Why is a non-disclosure agreement signed?

An NDA is signed in order to protect trade secrets while entering into business deals. This becomes extremely important especially in the case of protecting intellectual property rights and more so for modern-day startups. Let’s assume that a company has to hire an adviser from outside the company to help give inputs for a novel product. In such a case, the adviser can be asked to sign an NDA so that he does not disclose information about the product to the company’s competitors or anybody else. 

An NDA could be unilateral, bilateral, or multilateral

An NDA can be both unilateral where just one party agrees not to disclose sensitive information and bilateral where both parties agree to maintain secrecy. There can also be multilateral NDAs that are signed by three or more parties. These help in doing away with the need for multiple agreements. Also, it does not have to be only business deals where an NDA can be signed as it can be signed even between an employee and employer of a company or a non-disclosure clause can be inserted in just about any contract. 

Essentials of a non-disclosure agreement

  • Must be an agreement: First and foremost, an NDA must have all the essentials of an agreement. For this, broadly, there must be an offer, acceptance, creation of a legal relationship, and consideration. 
  • Protected information: With regard to the non-disclosure part of the agreement, it must have the information that is protected. The parts of the agreement to be kept confidential also have to be mentioned. This can be done so by marking certain documents as ‘confidential. Along with the same, a time period must also be mentioned up to which the agreement must be maintained.
  • Imposition of duties: Certain duties can be imposed with regard to the information in the agreement. For example, mentioning how to convey sensitive information and whom to. Consequently, failing to adhere to the said duties must result in punishments and the same must be mentioned as well. Certain exceptions can also be given where sharing the information would not attract consequences. 
  • Dispute resolution: Referencing as to how to settle disputes arising out of the agreement can be provided, though it isn’t of too much importance. Here, a ‘jurisdiction clause’ that mentions the court to have jurisdiction in case of a dispute can also be inserted. There can also be clauses mentioning that disputes must be settled through arbitration only and so on. It is worth noting that such jurisdiction clauses are not ‘essentials’ as such as an NDA can do without them as well, but including them can make things easier if a dispute arises in the future.

Importance of a well-drafted non-disclosure agreement

Firstly, a non-disclosure agreement is important as it helps maintain the confidentiality of information that could be misused. Further, such agreements help in building trust and confidence among the parties thereby further benefiting the business. This is because they help in knowing obligations and adapting to them. If confidentiality is kept, there is bound to be an increase in trust. 

    Due to the importance of NDAs, it is important that they are well-drafted. If such an agreement lacks sharpness, it could result in a lack of clarity leading to the confidentiality being broken or causing a confusing situation. If that happens, it could result in lengthy litigation to resolve the issues. This is exactly why legal personnel should be the ones to draft a Non-Disclosure Agreement. It is an absolute must for the parties concerned to read and understand each and every term in the agreement. If there are terms that are difficult to understand, they must be clarified as this might lead to a number of issues or disputes in the future. 

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Gratuity under the Social Security Code, 2020 and its implications 

Priyasha Sen Gupta, Flywork.io TeamFlywork.io. 

Introduction

The term ‘Labour’ falls underneath the Concurrent List of the Indian Constitution. The Code on Social Security,  2020 arose from the recommendations of the 2nd National Commission on labor, which stated in its report that the existing labor laws must be amalgamated based on the subject matter. The Code came into effect in  December 2019, while the Parliamentary Standing Committee submitted its report on July 31, 2020, and subsequently proposed a new draft law, the Code on Social Security 2020, which aims to review and integrate the Social Security Law in order to extend social security to all employees and workers, be it organized, unorganized sectors or any other sectors. Another major objective of the Code is to promote technology to ensure compliance and enforcement of its regulations are easily achieved. 
Currently, unorganized workers are not covered by the Employee Provident Fund and Employees' State Insurance.  According to the Social Security Code, 2020, the Central and State Government will issue the special schemes to ensure that the gig workers and others in the non-organized sectors have tangible social security and benefits in the form of pensions, benefits for accidents at work, funeral allowances, etc. 

Amalgamation and Improvement of Various Laws regarding Gratuity

One of the nine laws that the Code subsumes is the Payment of Gratuity Act, which is a major retirement benefit for employees in India and applies to all organizations with more than ten employees (including unorganized workers) (i.e., MNC, schools, and other companies) because employees sacrifice the prime moments of their lives for the development, prosperity, and betterment of their employers, an employer pays his employee gratuity as a  graciousness or gift. Gratuity is a statutory obligation of the employer to promptly tip their employees when they are due. Previously, gratuity was applicable only to employees who had worked in the company for five consecutive years, based on their 15-day salary for a full year. In the event of death, disability, etc., it can deviate from the five-year rule. 
The mandatory minimum five-year gratuity was abolished in the Bill of the Social Security Code, but different threshold structures were introduced for various categories of employees. The prerequisite for this is that the regular and permanent employees must have worked for at least five years to be eligible. Although no such restriction applies to employees with fixed-term contracts, the employer pays gratuity on a pro-rata basis i.e., it is linked to their tenure of the employment. If an employer fails to pay any amount of gratuity to which an employee is entitled,  he shall be sentenced to imprisonment for a term which may extend to one year or with a fine which may extend to Rupees fifty thousand or with both. 

Current Scenario

This move is in sync with the changing dynamics of the Indian labor force. Since the duration of service has generally been reduced, most workers are now employed on a contractual basis. Further, it additionally allays the concern raised by trade unions, that certain employers retrenched employees before the completion of 5 years,  solely to avoid making gratuity payment. 
Under the existing Payment of Gratuity Act, wages include the basic salary and dearness allowance and exclude all other allowance. However, under the Social Security Code, a new concept of deemed wages has been introduced, which means that if an employee receives more than 50% of the total remuneration in the form of allowances and other amounts not included within the definition of wages, then the excess amount would be considered as wages for the purposes of contributions towards Employee Provident Fund. The prospect of social security would, as an immediate consequence, increase the financial burden on employers and also reduce workers' cash. However, this could be mitigated if the Central Government stipulates a lower contribution rate for employees within the framework of the provisions of the Social Security Code. 
Gratuity is exempt from taxation, as long as every full year of service does not exceed 15 days salary, calculated based on the last salary received (up to Rs.2 million). It should be noted that employers can pay additional gratuity to employees, which is known as ex-gratia and is a voluntary contribution. Ex-gratia is subject to tax.

Conclusion 

Overall, the enactment of the Code on Social Security, 2020 is a welcome step by the Labour Ministry, which has made it easier to understand the scope and the ambit of the social security laws by consolidating the preexisting laws. The Code also defined various terms such as gig workers, unorganized workers which were not previously defined. This will help increase employment opportunities by engaging workers on a temporary basis and also make organizations responsible for the social security of these segments of workers, which will help combat exploitation while improving their overall compensation.

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