What Happens If You Break an NDA?
Non-Disclosure Agreements (NDAs) are very much in the news these days, and some people are questioning whether they should even be allowed in some situations.
As Forbes reported,
Zelda Perkins, former assistant to Hollywood producer Harvey Weinstein, has broken a nondisclosure agreement (NDA) regarding her monetary settlement for sexual harassment during her employment at Miramax.
As I blogged about recently, Weinstein has been accused of multiple instances of rape, sexual assault, and harassment.
One California State Representative, Sen. Connie Leyva (D-Chino) has announced that she intends to introduce a bill that would ban confidentiality provisions such as NDAs in monetary settlements for sexual assault and harassment.
Of course, the highest-profile NDA these days is one involving porn star Stormy Daniels.
As the New York Times reported,
In January we learned, thanks to The Wall Street Journal, that Michael Cohen, a lawyer for Donald Trump, arranged a $130,000 hush money payment to the pornographic film star known as Stormy Daniels in the closing days of the 2016 presidential campaign. The payment was to stop Daniels from speaking out about an alleged affair she’d had with Trump shortly after Melania Trump, his third wife, gave birth to their son, Barron.
Daniels, whose real name is Stephanie Clifford, signed an NDA as part of the settlement. She has argued that the NDA is null and void because Trump himself never signed it.
The NDA includes a liquidated damages clause requiring Daniels to pay a $1 million penalty to Trump for each violation of the NDA.
As reported by the Times, Cohen has obtained a temporary restraining order — issued by an arbitrator, not a court — in an attempt to prevent Daniels from speaking about her alleged affair with Trump in violation of the NDA.
Many people are bound by NDAs, which are a common part of employment agreements and business transactions, and most people honor them.
But what happens when a person breaks an NDA?
An NDA is a civil contract, so breaking one isn't usually a crime. However, when breaking an NDA also involves the theft of trade secrets, that can be a crime.
The federal Economic Espionage Act (EEA) makes it a crime to take, copy, or receive trade secrets without the owner's permission. But stealing trade secrets is illegal whether or not someone's signed an NDA promising to protect the trade secrets involved.
As Frontline notes,
In practice, when somebody breaks a non-disclosure agreement, they face the threat of being sued and could be required to pay financial damages and related costs. But legal experts say there’s limited case law on whether contracts like NDAs to settle sexual harassment claims can be enforced. In fact, many experts say such agreements could be declared void if a judge determines that enforcing one would essentially violate public policy. For example, a contract related to a crime.
Experts also say that NDAs can be used as a "scare tactic" against victims of assaults and harassment who are unsure that would happen if they spoke out.
In the wake of the #MeToo movement, as Newsweek reports, more and more victims of sexual harassment and assault are choosing to violate their NDAs rather than be silenced and protect the perpetrators.