Over half of US workers have signed a non-disclosure agreement (NDA), and in tech, that figure jumps to 73%. This raises the question: what happens if you break an NDA? For many, the first thought is leaking trade secrets.
In truth, NDAs can cover much more. They can stop workers from talking about pay or raising concerns about discrimination and safety. That silence can hide harassment and distort job markets. It can also make it harder for regulators to step in.
Even in states that limit NDAs, weak enforcement and corporate pressure still keep many workers from speaking up. That’s why it’s important to know both the consequences of breaking an NDA and the protections in place.
What Happens if You Break an NDA?
A non-disclosure agreement (NDA) is a civil contract, meaning it’s enforced under contract law. Breaking one isn’t a crime unless it involves criminal conduct, such as stealing intellectual property.
However, breaking a non-disclosure agreement can still have serious consequences, and what happens next depends on the situation and your state’s laws. If you breach an NDA, the other party can potentially sue for:
- Breach of contract
- Breach of fiduciary duty
- Violations involving trade secrets, copyright, or other intellectual property
They might also seek an injunction to stop further disclosures and claim damages for losses. If a court finds you acted with ill intent, you could face punitive damages on top of compensatory ones. Penalties for breaking an NDA can include financial liability and court orders stopping further disclosures, as well as payment of the other side’s legal fees.
Overall, what happens when you break an NDA comes down to the terms of the agreement, the nature of the information disclosed, and the legal protections in place. But if you speak up about wrongdoing, you may have legal protections.
Do NDAs Cover Crimes?
No. NDAs can’t be used to hide illegal activity or safety risks. Courts and regulators have made that clear for decades, and the SEC has acted on it. About ten years ago, it fined KBR $130,000 for language that threatened to punish employees who spoke to regulators. In cases like that, the penalties landed on the company, not the whistleblower.
Along with federal whistleblower laws that ban NDAs that stop someone from reporting fraud, waste, abuse, or safety violations, you’re also protected by:
- State laws: Since 2019, seven states have limited NDAs in sexual harassment cases.
- Federal laws: The Speak Out Act (Dec 2022) bans the enforcement of NDAs or non-disparagement clauses signed before sexual assault or harassment disputes.
- SEC Rule 21F-17: Prohibits NDA language that stops employees from reporting securities law violations to the SEC.
Hush money agreements that block lawful reporting have been struck down in multiple federal circuits. If an NDA tries to cover up a crime or otherwise tries to limit reporting of unlawful activity, it won’t hold up in court.
The #AppleToo Initiative
In September 2021, Apple fired senior program manager Ashley Gjøvik, claiming she broke confidentiality rules.
Gjøvik said it was really retaliation for her public complaints about Apple’s employee surveillance and other misconduct. She argued workers have the right to report such issues to authorities, NDA or not.
The US National Labor Relations Board investigated. Prosecutors later ruled Apple’s employee policies were “illegal” because they violated workers’ rights.
Can You Break an NDA to Report a Crime?
If you are subject to an NDA but share information with law enforcement during an investigation into illegal activity, you usually won’t face legal consequences. Before acting, look closely at the situation. Ask yourself:
- Does the activity violate a specific law or regulation? Check which laws might apply, such as employment laws, environmental regulations, or financial fraud statutes.
- Is there harm or potential harm to others? Serious misconduct often causes harm to individuals, the public, or the environment.
- Is the activity intentionally deceptive or fraudulent? Many illegal acts involve deceit or attempts to defraud.
- Does it involve misuse of power or breach of trust? Actions that exploit authority or betray a fiduciary duty often qualify as serious misconduct.
If the answer is yes to any of these, you may have a moral and sometimes legal duty to report. In some cases, failing to report could even lead to legal consequences if you are obligated to report misconduct by law. Whistleblower laws may protect you, depending on the type of violation:
- EEOC handles workplace harassment or discrimination. File within 180 days.
- OSHA covers workplace safety violations. Deadlines range from 30 to 180 days.
- SEC and CFTC investigate securities or commodities fraud. You can file anonymously.
- IRS Whistleblower Law addresses tax law violations. Rewards are possible, but no federal anti-retaliation protection.
- The False Claims Act targets fraud involving government funds. Offers some retaliation protection.
Civil matters usually involve private disputes and monetary damages. Criminal matters involve breaches of public law and can lead to fines or prison. Some acts, like assault, can be both civil and criminal. Misconduct such as sexual harassment may not be criminal, but it is still very serious.
Before you take action, speak with a lawyer. They can explain your rights, the protections available, and the safest way to report, so you fully understand what happens if you break an NDA in your situation.
When NDA Clauses Cross the Line
In Macktal v. Brown & Root, a settlement barred a whistleblower from testifying about nuclear plant safety. The Secretary of Labor removed the clause but approved the rest. On appeal, the court ruled she had to accept or reject the deal as written. The gag clause still failed because it tried to block lawful reporting.
Use NDAs Responsibly
NDAs have a place in business, but they shouldn’t be so broad that they hide unlawful conduct or block lawful reporting. That concern is growing, with the FTC banning non-competes and states taking their own steps. Together, those changes may push some employers to lean more on NDAs.
In light of this, it’s more important than ever to keep NDA terms clear, lawful, and limited to truly sensitive information. If you want to see what that looks like in practice, LegalTemplates offers NDA templates designed to keep terms focused on truly sensitive information.
