You Can Break an NDA to Report a Crime. But Should You?

A non-disclosure agreement (NDA) is a legal contract that establishes confidentiality and prohibits the disclosure of certain information.

However, when it comes to reporting a crime or serious misconduct, the question arises: Can you break an NDA to report a crime?

The short answer: Typically, yes. While non-disclosure agreements generally do not shield perpetrators from criminal prosecution, several factors should be considered before deciding to break an NDA and report a wrongdoing.

This article will explore five crucial questions to ask yourself before taking such action and discuss the potential consequences involved.

Table of Contents

• Questions to Ask Before Breaking an NDA to Report a Crime
  • Is the information truly about illegal activity or serious misconduct?
  • Am I protected under whistleblower laws?
  • Do I Have Enough Evidence?
  • How Can I Minimize Breach of Confidentiality?
  • Am I Prepared for the Consequences?
• Conclusion

5 Questions to Ask Before Breaking an NDA to Report a Crime

NDAs are civil contracts, meaning that breaking one technically won’t be considered a criminal offense (unless the breach is associated with criminal conduct such as IP theft)). Penalties generally include compensatory damage and sometimes punitive damage if the breach is proven to be with ill intent.

Although confidentiality breach is serious misconduct, common law generally finds that any act resulting in a crime will not be afforded the protection an NDA offers.

While this can vary on the specific situation, an individual who discloses information to law enforcement in an official capacity during illegal activity will likely not face any legal consequences.

1. Is the information truly about illegal activity or serious misconduct?

To determine if an activity you’re considering reporting falls under illegal activities or serious misconduct, ask yourself these questions:

1. Does the activity violate a specific law or regulation? – Research the relevant laws or regulations that might apply to the situation you’ve observed. This could include employment laws, environmental regulations, financial fraud statutes, etc.
2. Is there harm or potential harm to others? – Consider whether the activity causes direct harm to individuals, the public, or the environment. Serious misconduct often has a detrimental impact on others or poses a significant risk.
3. Is the activity intentionally deceptive or fraudulent? – Many illegal acts involve deceit or an attempt to defraud individuals, companies, or government entities.
4. Does the activity involve misuse of power or breach of trust? – Actions that exploit a position of power or betray a fiduciary duty often fall under serious misconduct.

Reporting illegal activity or serious misconduct is generally considered a moral obligation. In fact, you could face legal action for not disclosing such information if you are aware of specific misconduct but fail to report it to authorities.

Understanding the difference between civil and criminal matters can also guide your decision.

Civil cases involve disputes between parties over rights and obligations that are not criminal in nature, such as personal injuries or contract breaches. The outcome typically involves compensation to the aggrieved party rather than imprisonment.

Criminal cases, on the other hand, deal with actions that violate laws designed to protect public safety and welfare, leading to prosecution by the government. Convictions may result in fines, community service, probation, or imprisonment.

Some behaviors can lead to both civil and criminal cases, like in instances of assault, where the perpetrator might face criminal charges and a civil lawsuit for damages. The distinction between criminal acts and civil wrongs is crucial in deciding whether to break an NDA.

While NDAs cannot legally prevent reporting of criminal activities, as it goes against public policy, the line becomes blurrier with civil wrongs like sexual harassment, which may not always be criminally actionable but still represents serious misconduct.

Consulting with legal counsel can help clarify these distinctions and guide your actions in a way that aligns with both legal obligations and moral imperatives.

All in all, it is essential to ensure that the information is of sufficient gravity to warrant breaking the NDA.

► READ MORE: Should You Sign That NDA?

2. Am I protected under whistleblower laws?

Whistleblower laws protect individuals who report illegal activities or wrongdoing within organizations. These laws vary by jurisdiction, so it is crucial to understand the legal protections available to you.

The wrongdoing you are reporting determines the type of whistleblower law that can afford you legal protection from retaliation by your employer.

Some common business misconducts and crimes may include the following:

Workplace Harassment and Discrimination

Law: Title VII of the Civil Rights Act of 1964 and others
Enforcing Authority: EEOC
Anonymity: No
Anti-Retaliation: Yes

The EEOC is responsible for enforcing federal laws and regulations regarding sexual harassment and discrimination in the workplace. More specifically, 29 CFR § 1604.11 states that all employers should “take all steps necessary to prevent sexual harassment from occurring,” which includes “developing methods to sensitize all concerned,” such as retaliation.

Victims must file their complaint within 180 days of the incident.

Safety and Health Hazards

Law: See Whistleblower Laws Enforced by OSHA
Enforcing Authority: OSHA
Anonymity: No
Anti-Retaliation: Yes

OSHA has established a comprehensive Whistleblower Protection Program that protects employees from retaliation for raising safety and health concerns to authorities. These concerns can include internal issues, such as workplace hazards, and external problems, such as consumer product safety.

The program requires complaints be filed within 30 to 180 days, depending on the type of misconduct.

Fraud in Securities and Commodities Trading

Law: The Dodd-Frank Act
Enforcing Authority: SEC and CFTC
Anonymity: Yes
Anti-Retaliation: Yes

The Dodd-Frank Act, built upon the 2002 Sarbanes-Oxley Act, created a whistleblower program in the SEC and the CFTC, respectively. These programs protect the whistleblower’s identity as they can file complaints anonymously through an attorney and claim financial rewards for successful enforcement.

Additionally, it’s illegal for employers to retaliate against employees who act as whistleblowers. If a whistleblower is fired or faces any form of punishment from their employer for their actions, they are entitled to file a lawsuit to enforce their rights under the law.

Tax Law Violations

Law: IRS Whistleblower Law
Enforcing Authority: IRS
Anonymity: No
Anti-Retaliation: Yes

While the IRS whistleblower reward law doesn’t allow whistleblowers to submit claims anonymously, individuals who report such violations may be eligible for financial rewards, especially if the disputed amount is significant.

Unfortunately, the IRS whistleblower law does not contain an anti-retaliation provision. Nevertheless, tax whistleblowers can find protection under applicable state laws or other federal legislations that forbid discrimination against whistleblowers.

Fraud Involving Government Funds

Law: The False Claims Act
Enforcing Authority: Federal Court
Anonymity: No
Anti-Retaliation: Yes to an extent

The False Claims Act allows individuals to sue on behalf of the government for false claims made for government funds and receive a portion of the recovered damages. It’s commonly used in cases of fraud involving government contracts and healthcare programs like Medicare or Medicaid.

In addition to the Act, 32 states have enacted their own false claims act.

Although Section 3730(h) of the Act prohibits an employer from firing, demoting, or harassing the whistleblower, there has been disagreement in the courts about the extent of protection provided under it.

Apart from federal laws and regulations, you should also research the whistleblower laws in your state to determine if there is additional state-level whistleblower protection available.

3. Do I Have Enough Evidence?

Here are some types of evidence you may consider preparing for a solid claim:

• Documentation of the Wrongdoing: This includes emails, internal reports, financial records, or other documents that directly demonstrate the illegal or unethical activity. Ensure that gathering these documents does not violate any laws, including privacy laws.
• Witness Testimony: Statements or accounts from other individuals who have witnessed the wrongdoing can be powerful evidence. This can include co-workers or other credible individuals aware of the situation.
• Physical Evidence: If relevant, this might include things like defective products, samples of hazardous materials, etc., that are part of the misconduct.
• Communication Records: Keep a log of relevant conversations, meetings, or decisions related to the misconduct. This could include dates, times, participants, and summaries of what was discussed.
• Timeline of Events: Create a detailed timeline of the wrongdoing, including dates and details of key events. Personal notes, diaries, or journals that track your own experiences and observations can also be useful.

Remember, it’s crucial to avoid any action that could be considered illegal, such as hacking into secure systems, recording conversations without consent (in jurisdictions where this is illegal), or taking proprietary information in a manner that violates the law.

Consulting with an attorney before gathering or submitting any evidence is strongly advised to ensure that your actions remain within legal boundaries and to understand the potential risks and protections available to you.

4. How Can I Minimize Breach of Confidentiality?

Minimize the breach of confidentiality by disclosing only the necessary information to support your claims. This involves carefully navigating the process to ensure that you disclose only as much information as is necessary.

Here are some action points to follow:

• Review Your NDA: Carefully review the terms of your NDA to identify what constitutes confidential information. For example, information already in the public domain (e.g. the Internet) should not be considered confidential.
• Identify the Core Information: Focus on the specific details directly related to the illegal activity or misconduct. Redact information irrelevant to the case when submitting documents or evidence, such as personal details of individuals not involved, proprietary information, trade secrets, or any data that does not directly support your claims.
• Use Secure and Appropriate Channels: Use secure and officially sanctioned channels when reporting the issue. This could be through government whistleblower programs, regulatory bodies, or law enforcement agencies with protocols to protect confidential information.
• Limit the Number of People Informed: Only share your concerns and evidence with individuals or authorities directly involved in addressing the complaint. Avoid discussing your report with colleagues or external parties who do not need to know.
• Document Your Disclosures: Keep detailed records of what information you disclose, to whom, and when. This documentation can be crucial if there are questions about your compliance with the NDA or if you need to defend your actions.
• Consider Anonymity: If possible, consider reporting anonymously. As previously mentioned, some whistleblower programs and hotlines allow you to report misconduct without revealing your identity, which can minimize the risk of breaching confidentiality agreements.
• Prepare a Careful Statement: If you need to explain your actions, either as part of the reporting process or afterward, prepare a statement that explains your reasons for disclosing the information without divulging further confidential details.
• Consult with a Lawyer: Before taking any steps, speak with a legal professional who can advise you on the safest way to proceed. A lawyer can help you understand the scope of your NDA, your rights as a whistleblower, and how to disclose information strategically.

► READ MORE: How to Effectively Handle a Breach of Confidentiality

5. Am I Prepared for the Consequences?

Despite various whistleblower protection programs in place, breaking an NDA and reporting a crime can still have significant consequences. Some possible consequences may include:

• Retaliation: Retaliation against whistleblowers can take many forms, varying in severity and impact. While whistleblower laws protect whistleblowers from retaliation, it may take time to address and rectify any retaliation you may face. It is important to be prepared for the possibility of a lengthy legal process to fight against any retaliatory actions taken by your employer.
  Here are some possible retaliations that whistleblowers might face:
  • Career: Termination; demotion or promotion denial; negative performance review
  • Interpersonal: Harassment, bullying, exclusion
  • Legal: Lawsuits
• Career Prospects: Breaking an NDA to report a crime may harm your professional reputation and limit your future career prospects within certain industries or organizations. Some employers may view individuals who have broken NDAs as untrustworthy, potentially impacting your ability to secure future employment.
• Personal Relationships: Reporting a crime can strain personal relationships, especially if it involves individuals you know or work closely with. Consider the potential impact on your relationships and the support system you may need during the process.
• Emotional and Financial Burdens: The process can be emotionally and financially taxing. It may require hiring an attorney, participating in legal proceedings, and dedicating significant time and resources. Ensure you are prepared to handle the potential personal burdens that may arise.

Weigh these potential consequences against the gravity of the crime or misconduct being reported. Seek legal advice to fully understand the implications and make an informed decision.

Conclusion

Breaking a non-disclosure agreement to report a crime is a complex decision that requires careful consideration of various factors. While NDAs cannot shield perpetrators from criminal prosecution, potential consequences and legal protections should be taken into account.

Assess the seriousness of the crime, understand your rights as a whistleblower, gather sufficient evidence, minimize breach of confidentiality, and be prepared for the potential consequences before making a decision.

Seeking legal counsel can provide guidance and help navigate the complexities involved in reporting a crime while considering the terms of an NDA. Ultimately, the decision to break an NDA to report a crime should be made with a clear understanding of the potential impact on your personal and professional life.