A non-disclosure agreement is a civil contract, typically used in settlement agreements or as a restrictive covenant in employment contracts to prevent confidential information leaks. However, they are often abused.
We will explain what happens if you break an NDA and your legal rights protecting you from lawsuits if you suffer criminal wrongdoing.
Breaking an NDA
If your actions breach the terms of your agreement, you have broken the NDA. Typically, this means disclosing information to third parties.
Consequences of Breaking an NDA?
Breaking an NDA can have severe financial and legal consequences. The other party will follow a lengthy process to prove you breached the agreement.
Investigating the Breach
Firstly the other party’s HR and legal teams will investigate the alleged breach. They will review the contract’s wording to identify whether the guilty party’s actions breach its terms. There are some exemptions, such as criminal activity, an expired NDA and others mentioned in the Public Interest Disclosure Act.
Then, they will search for concrete evidence of what information was disclosed, when, to who, and by whom.
Legal Action
The affected party’s solicitors will evaluate whether they have enough evidence to pursue a legal claim. An NDA is a civil contract; they can sue the guilty party. Their decision will likely depend on:
- The disclosure’s severity
- The financial damages
- Whether the guilty party intended to breach the NDA
- Whether a legal case is in the company’s interest
Penalties
If the affected party pursues a lawsuit, both parties should instruct solicitors. They may settle outside court, although this resolution is uncommon. The affected party typically pushes for court proceedings for compensation.
The contract may discuss this compensation. If not, the Court will use its discretion if the affected party is successful.
Damages
In most cases, the guilty party will pay damages to the affected party as compensation for financial losses caused by the breach.
Injunctions
An injunction is a court order instructing a party to refrain from doing something or face a contempt of court charge. If the guilty party cannot pay damages, the Court may grant an injunction restricting their access to and preventing them from disclosing confidential information again.
Should We Regulate the Use of NDAs?
In recent years, NDAs have increasingly been employed to cover up sexual harassment allegations. Many MPs have requested new legislation to prevent non-disclosure agreements from averting reports to the Police.
However, we may not need these new regulations, as NDAs cannot ‘Pervert the Course of Justice.’ It is an indictable (serious) offence carrying a high risk of imprisonment, even on a first-time conviction.
Common examples of perverting the course of justice include:
- Making false allegations
- Fabricating evidence
- Concealing evidence
- Obstructing the police
- Perjury
- Interfering with the jury
Concealing evidence of an offence is common, typically by destroying or encrypting hard drives, shredding or burning documents, or hiding things.
Though normally applicable during a police investigation, in the case of R v Rafique in 1993, the Court held that an intention to pervert the course of justice could happen before the discovery of criminal conduct.
Perverting the Course of Justice and NDAs
In the 1973 case of R v Panayiotou (P), the accused used a third party to offer silencing money to a woman alleging P had raped her. P was convicted of perverting the course of justice for trying to bribe the woman to withdraw the allegation she had made.
This case establishes that paying money to somebody to withhold details of a criminal offence from the authorities amounts to perverting the course of justice.
In ourmy experience, most of the confidentiality clauses in employment settlement agreements contain an exclusion stating:
‘The parties agree to keep the terms of this agreement and circumstances concerning the termination of your employment confidential, except where such disclosure is to HMRC, any regulatory or law enforcement body or supervisory authority ….’
A clause such as the above clearly states that disclosure may be made to the police or the CPS as they are law enforcement bodies.
Solicitors are unlikely to insert a clause declaring that the employer’s conduct should remain hidden from the police for the payment of money, as they would fall foul of SRA rules.
Even if an NDA did not contain the words above, the Court would likely dismiss a claim against an ex-employee that made a complaint to the police.
Imagine a Complainant (C) is sexually assaulted at work. They bring a grievance and decide to leave that place of work, agreeing to a compromise agreement with a confidentiality clause with the Employer (E). It does not include the words outlined above.
After receiving the compensation payment, C reports the matter to the police. In response, E alleges a breach of the compromise agreement and brings a claim against C in Court.
E tells the court it is not trying to stifle or impede any prosecution; it just wants its money back due to the breach.
If the action is not struck out for abuse of process, the Court will likely rule that any contractual clause preventing reports to the police is void. Then they will report the employer and its solicitors to the Attorney General for attempting to pervert the course of justice.
What to Include in an NDA
You should always instruct a solicitor to carefully draft a legally binding NDA. They can protect your trade secrets if prepared properly, but they can cost you if not.
You should include:
- Detailed descriptions of the confidential information
- An explanation of the agreement’s purpose and intentions
- A specific time frame
- Personal information
- Explicit consequences for a breach
How to Exit an NDA
Sometimes, NDAs are poorly drafted and not legally binding, even if the other party acted lawfully. Through careful analysis, you may find that it does not apply. Check:
Termination Clauses
Your agreement may have a termination clause requiring you to complete specific steps to exit.
The Language
Broad language often leaves room to exit an NDA earlier than initially intended. Instruct a solicitor for a thorough review.
Public Domain
When the protected confidential information has already entered the public domain, you have a case to void the NDA.
Instruct Our Solicitors Today
Contact our solicitors today to learn more about what happens if you break an NDA or to get help drafting or fighting an agreement. We can arrange a no-obligation consultation over the phone or in person.
