People on the internet have plenty of opinions about nondisclosure agreements (NDAs) — what they are, the consequences of breaking them, and whether they hold any legal weight. When it comes to the consequences of breaking an NDA, opinions are particularly divided into two camps.
The first camp thinks NDAs are just scare tactics, no more threatening than a sternly worded memo. The other views NDAs with the kind of dread usually reserved for horror movie villains. So, which camp should you side with?
With NDAs, particularly the legal ramifications of breaking one, it’s not quite as simple as picking a camp.
Tattling is tempting and other reasons why people break NDAs
If you’ve ever been told a secret and felt an uncontrollable need to talk to someone about it, then you already understand why people break NDAs. It's human nature to reveal insider information — whether it’s office gossip or drama within your friend group.
Revenge is also a primary motivator for breaking an NDA. Interestingly, revenge is one of the reasons NDAs exist in the first place. For example, employees who feel they were wrongfully terminated might spill company secrets out of spite. If they vent only to friends, it’s harmless enough. But with social media, sharing harmful company secrets has never been so tempting. An NDA’s job is to put the fear of litigation into the hearts of employees who might plot revenge against their former bosses.
Some people break an NDA to make a quick buck. Imagine you’re in possession of a secret so valuable you had to sign an NDA, but then you get an offer to spill it. Wouldn't you be tempted? You, dear reader, who follow our legal blog, would know better. Unfortunately, many others would take the bait.
Lastly, sheer ignorance of having signed an NDA is another reason NDAs get broken. And for those who feign ignorance, the legal consequences can be quite the wake-up call.
Blab at your own risk
Whether you’re on the verge of breaking an NDA or just curious about the fallout, one thing’s for sure: there will be repercussions.
First, you might be on the hook for actual damages (the financial loss your blabbing caused) or liquidated damages (a pre-agreed amount specified in the NDA). Either way, you’ll quickly discover that gossiping comes with a real dollar cost.
If the aggrieved party decides to sue (not just make you pay), the costs skyrocket. Think attorney fees, court costs, and the therapy bills from all the stress you’ll encounter. Breaking an NDA is like signing up for an expensive, unwanted subscription service.
Besides the monetary hit, there’s a professional cost, which often translates into financial cost. Employers and potential business partners don’t look kindly on those who can’t keep their mouths shut. Gaining a reputation for breaking NDAs — even just one — can make you look like an unemployable, walking liability.
Fine print follies: Limitations of NDAs
Having said that, NDAs aren’t foolproof. Otherwise, we’d end on this note and advise you to just follow NDAs unconditionally. The fact is, NDAs are more of a deterrent than an absolute safeguard. An NDA isn’t a get-out-of-jail-free card for all things confidential, and they come with these limitations:
Not always enforceable
NDAs must be reasonable and clear to hold up in court. If an NDA is too vague, overly broad, or downright unfair, a judge might toss it out. An example of an unenforceable NDA is the case of Lasership, Inc. v. Belinda Watson and Midnite Air Corp. In this case, a lead dispatcher left her job at a global delivery company to work for a competitor nearby, performing similar duties and contacting her former employer's customers. The court found the employment contract unenforceable because the non-compete clause was too broad, prohibiting her from working in any capacity for a competitor.
Public Information
Coca-Cola, producers of one of the world’s finest sugary beverages, have managed to keep their trade secrets under wraps, presumably thanks to some ironclad NDAs. This is a prime example of an NDA doing a fine job protecting invaluable company secrets. However, once the secret is out, no NDA can pull it back in.
Whistleblower protections
NDAs cannot be used to silence whistleblowers. Put another way, an NDA cannot be used to cover up a crime — there are laws around that. If someone reports illegal activities, safety violations, or other serious issues to the authorities, an NDA won’t stop them. Laws often protect these individuals from retaliation, making their NDA breach a non-issue.
Expiry dates
Many NDAs come with an expiration date. Once that date passes, the confidentiality agreement no longer applies, and the information can be freely shared.
Case in point: English actress Ruth Wilson, who signed an NDA upon being hired to work on the television show The Affair. In 2019, Wilson dropped hints to the press about the allegedly toxic working environment of the show, which might explain her abrupt exit from it. But because she signed an NDA, she could only hint at her true feelings in interviews. Interestingly, NDAs can even restrain individuals from mentioning that they signed one in the first place.
If you’ve ever watched The Affair or any TV show where one of the main characters left abruptly with no explanation, it was likely due to a workplace issue. And thanks to those three little letters — N, D, and A — the actors couldn’t talk about it.
Read parts 1 and 2 of our series about NDAs:
The ABCs of NDAs (Part 1): The basics, the bizarre, and the ironclad
The ABCs of NDAs (Part 2): Confidentiality in the business of relationships
Nonconfidential information: You can talk to lawyers about NDAs
When it comes to confidentiality, understanding your rights can save you from unnecessary drama. Whether you're looking to draft an agreement to protect sensitive information during a divorce or seeking advice on the implications of confidentiality in family matters, we’re here to help. Contact us or leave us a message.