How Breaking a Nondisclosure Agreement Works


When It's OK to Break a Nondisclosure Agreement
Andrea Constand (C) celebrates with her lawyers after Bill Cosby is found guilty on all counts of sexual assault. Constand alleged that the entertainer drugged and molested her in 2004. She had signed an NDA after settling her lawsuit earlier but a judge called on her to testify, thus allowing her to legally break her NDA. Mark Makela/Getty Images

Despite being legally binding contracts, not all nondisclosure agreements are airtight. There are certain circumstances that U.S. courts have agreed to allow the breaching of an NDA without any penalties.

First, an NDA cannot prevent a person from cooperating with a criminal investigation. In the criminal trial of comedian Bill Cosby, for example, several of his accusers had signed NDAs with him when settling sexual assault lawsuits. One of those women, Andrea Constand, had kept silent for more than a decade as her NDA had required. But when a judge called Constand to testify in the trial, she was free to tell her story publicly for the first time [source: Dale].

Cosby wanted Constand to return the $3 million she received in her confidential agreement when she went public with her accusations. But a judge ruled that "a provision preventing someone from voluntarily sharing information about crimes with law enforcement would be unenforceable" [source: McCrystal]. Because of her damning testimony, Cosby was convicted on three counts of sexual assault in April 2018 [source: Benshoff].

Also, an NDA cannot prevent employees from reporting illegal workplace conduct to either the police or the Equal Employment Opportunity Commission (EEOC), the U.S. government agency charged with enforcing the nation's workplace discrimination laws. And once an EEOC investigation is underway, other workers bound by NDAs can break them to cooperate with an agency probe [source: Lobel].

In 2016, President Barack Obama signed into law the Defend Trade Secrets Act, which allows U.S. companies or individuals to sue in federal court for breaches of NDAs meant to product trade secrets. The law was meant to better protect companies against leaks and theft of proprietary information, but it also includes an important carve out — no one can be punished under the law for breaking an NDA as a whistleblower. In other words, a worker can publicly expose criminal wrongdoing at her place of business without risk of being sued under the new law [source: Cohen, Renaud and Armington].

Those are the clear-cut cases when the courts have established that it's OK to break an NDA. But there are other situations that are murkier. For example, the U.S. National Labor Relations Board (NLRB) protects workers' rights to engage in a "concerted activity" for their mutual benefit [source: NLRB]. Traditionally, this has protected workers from retaliation from the boss if they meet to discuss unionization or collective bargaining for better wages or working conditions.

But some legal experts wonder if that same "concerted activity" protection shouldn't cover victims of sexual harassment who want to warn coworkers of their boss's predatory behavior, but are stymied by an NDA from a legal settlement. In fact, there are lots of questions being raised about the enforceability of sexual harassment NDAs in the age of the #metoo movement. We'll tackle that topic next.

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