A confidentiality agreement, often called a non-disclosure agreement (NDA), is a binding legal contract designed to protect sensitive information. But what happens if you break a confidentiality agreement? Whether the breach was accidental or malicious, the fallout can be severe.
For individuals, it can mean the loss of a job or professional reputation. For businesses, it can lead to financial ruin. For everyone involved, it almost certainly leads to complex legal challenges.
At Zimmerman Law Offices, our Chicago class action lawyers have seen firsthand how high the stakes associated with these agreements are. Below, we break down the consequences of a violation of confidentiality and what you can expect if you find yourself on either side of a breach of confidentiality lawsuit.
What Is a Confidentiality Agreement?
A confidentiality agreement is a legal contract used to protect proprietary information, trade secrets, products, patents, and trademarks. These agreements ensure that sensitive data shared between parties remains confidential.
Examples of confidentiality agreements include those between an employer and employee or two companies exploring a partnership. When you sign an NDA, you are promising not to disclose specific information to competitors, the media, or the general public.
What Constitutes a Violation of Confidentiality?
A violation of confidentiality occurs when one party discloses restricted information without authorization. This can happen in various ways:
-
Direct Disclosure:
Intentionally sending trade secrets or client lists to a competitor.
-
Accidental Leaks:
Leaving a sensitive document on a coffee shop table or accidentally forwarding an email to the wrong person.
-
Public Discussion:
Talking about confidential details on social media or in a public interview.
-
Improper Use:
Using confidential information to start a competing business.
Consequences: What Happens If You Break a Confidentiality Agreement?
The severity of the consequences often depends on the terms of the contract and the extent of the damage caused. However, most breaches trigger a cascade of legal and professional repercussions. Potential consequences include the following.
1. A Breach of Confidentiality Lawsuit
The most immediate risk is a breach of confidentiality lawsuit. If a company or individual believes you have violated the agreement, they can sue you for breach of contract.
In these lawsuits, the plaintiff (the injured party) must prove that:
- A valid contract existed.
- The contract was breached.
- They suffered damages as a result of that breach.
2. Financial Penalties and Damages
If the lawsuit is successful, the court may order the breaching party to pay significant financial damages. These can fall into several categories:
-
Compensatory Damages:
Money intended to cover the financial loss the business suffered (e.g., lost profits or lost clients).
-
Punitive Damages:
In cases of malicious intent, the court may award extra damages to punish the violator.
-
Liquidated Damages:
Many NDAs have a specific clause stating exactly how much money must be paid if the contract is breached, regardless of the actual provable harm.
-
Legal Fees:
The losing party is often required to pay the legal fees for both sides, which can amount to tens of thousands of dollars.
3. Injunctive Relief
Money takes time to collect, but a leak needs to be stopped immediately. As experienced attorneys, we often see companies file for injunctive relief.
An injunction is a court order that forces the violating party to immediately stop the specific action (i.e., stop sharing the information). Courts grant this when a violation of confidentiality causes “irreparable harm” that money alone cannot fix. Violating a court injunction can lead to being held in contempt of court, which carries its own severe penalties.
4. Employment Termination and Reputational Harm
For employees, the answer to “what happens if you break a confidentiality agreement” is often immediate termination. Most employment contracts list breach of confidentiality as grounds for firing “with cause.”
Beyond losing your current job, a breach can tarnish your professional reputation. Being known as someone who leaks confidential data can make it nearly impossible to find future employment in your industry.
5. Criminal Charges
While most NDA breaches are civil matters, they can cross into criminal territory. If the breach involves the theft of trade secrets (such as proprietary software code or formulas), it may violate federal laws like the Economic Espionage Act. In these extreme cases, the consequences can include fines and jail time.
Defenses Against a Breach Claim
Not every disclosure is a violation. If you are facing a breach of confidentiality lawsuit, there may be valid defenses available, such as:
-
The information was already public:
You cannot breach confidentiality on information that is already in the public domain.
-
You were forced by law:
If a court subpoenaed the information, complying with the court order is generally not considered a breach.
-
The agreement was too broad:
Courts sometimes invalidate NDAs that are overly restrictive or unreasonable in their scope.
Contact Zimmerman Law Offices Today
Navigating the complexities of non-disclosure agreements requires experienced legal counsel. Whether you are a business protecting your trade secrets or an individual accused of a breach, the outcome of your case depends on aggressive and knowledgeable representation.
At Zimmerman Law Offices, we have a team of Chicago class action lawyers who have litigated numerous non-disclosure and privacy lawsuits. We fight to ensure our clients’ rights are protected and that they receive the outcome they deserve.
Call Attorney Tom Zimmerman at 1-877-440-0020 or contact us online to schedule your free initial consultation.
