What happens if you break an NDA?

Non-disclosure agreements (NDAs) are widespread across the business world, but what happens if you break an NDA? 

The answer ultimately depends on your circumstances.

However, it is fair to assume that breaking an NDA will leave you liable to legal action from your employer, potentially resulting in financial penalties. 

Often, the consequences of breaking an NDA are clearly spelled out in the agreement itself.

While the exact terms of an NDA will differ across industries, a standard NDA template will often intend to prevent the disclosure of confidential information about your company.

Revealing such information can also result in legal consequences, regardless of whether or not you’ve signed an NDA.

However, if the information that you disclose can be classed as public domain information, i.e., things already known outside of your organization, your employer may struggle to enforce the NDA.

Similarly, you probably won’t be considered liable if you breach your NDA in order to reveal illegal activities.

The consequences of breaking an NDA are clearly more complex than they may appear at first glance.

If you intend to break one, you should probably consider seeking legal advice and getting a firm grasp of the potential ramifications.

What happens if you refuse to sign an NDA?

You could be presented with an NDA for a variety of reasons: maybe you’re starting a new job, or you’re about to take part in a meeting that requires you to know confidential information.

People will often simply sign NDAs without any issues, but the potential consequences of breaking an NDA might make you pause before you sign.

If you refuse to sign an NDA, however, you risk harming your employment prospects.

Companies spend a fair bit of money on NDAs (just consult our “How much does an NDA cost?” article for more on that), and they are a crucial part of many businesses.

Employers may choose to take back their offer of employment if you don’t sign one.

Similarly, you could limit your responsibilities in an organization if your employer can’t rely on you to access confidential information.

However, the exact consequences of refusing to sign an NDA will depend on your company.

If you have reservations about any legal document, you should look for an open and honest conversation with your company’s legal department or human resources team.

You’ll probably also want to consider consulting your own lawyer.

Can you break an NDA to report a crime?

There’s no doubt that one of the most complex aspects of an NDA is how they relate to illegal activity.

You might think that when considering how to write an NDA, some unscrupulous employers just want to use it as a coat of armor to protect themselves against unwanted legal attention - but the truth is that reporting crimes is protected in the public interest.

This means that you shouldn’t be afraid to report serious crimes to the police or other authorities, even if you have signed an NDA.

After all, they are almost always used ethically in order to protect commercial interests or safeguard personal information rather than hide criminal activity. 

What happens if you break a non-disclosure agreement?

Imagine that you feel the need to expose unethical activity at your company.

Or you accidentally leak confidential information outside of your organization. 

The first thing to note is that breach of NDA is not a criminal offense.

While it may lead to legal action, this will be due to the fact that NDAs are civil contracts.

But remember, revealing sensitive information to competitors can be a crime in itself. 

The consequences of breaking an NDA, therefore, depend on the clauses within it.

These will outline whether or not you’re legally liable and will also highlight any fines that you’ll be expected to pay for breaking it. 

Your company will likely begin an investigation to determine the extent of any breaches and decide whether to proceed with legal action.

If your NDA includes a termination clause that has already been actioned or the leaked information is in the public domain - this investigation will probably end the matter.

However, if not, you could end up facing a legal case. 

Avoid the risk of exposing confidential information with an NDA

The consequences of breaching an NDA can be very serious.

It can potentially lead to large fines and - in some cases - even criminal charges.

However, the exact results depend on the specific clause.

These will usually define the extent of any punitive fines that an NDA violation can lead to.

NDAs are a great way for companies to make sure that their sensitive information is kept secure - they’re used across a whole range of industries every day to safeguard potentially significant private information. 

Of course, NDAs aren’t the only way to protect your company from the exposure of confidential information to your competitors.

With some employees wary of the potential ramifications of leaving themselves open to legal action by signing an NDA, you might want to look at other options.

Check out our article on what is a non-compete agreement for a bit more on that.

Nevertheless, there’s little doubt that NDAs will continue to be a crucial legal tool for companies that want to avoid the risk of exposing confidential information to competitors - you might want to make the process clearer by explaining to your employees exactly what happens if you break an NDA.

This will allow you to keep sensitive information more secure as your business grows.