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Are confidentiality clauses enforceable?

A confidentiality clause or non-disclosure agreement is an essential tool for inventors, businesses and anyone looking to protect vital information. They’re commonly used in legal settlements, business transactions and employment contracts to protect trade secrets or sometimes potentially damaging information.

An NDA can be difficult to enforce because once a secret is out, it’s out. But anyone who breaches an NDA can still face other penalties.

For employees

Like other types of “restrictive covenants” — non-compete and non-solicitation clauses — the validity of an NDA depends on its “reasonableness, ” a determination made by courts, arbitrators or tribunals. The reasonableness of an NDA is at least partly based on the duration of the agreement and whether adhering to the NDA would hinder the employee’s own livelihood.

An NDA is essentially a contract and you can face stiff penalties for breaching one. If you exposed a company’s trade secret, like the secret formula for Coke, or other valuable information, the company will likely pull out all the stops to get compensation, including termination and a lawsuit.

In legal settlements

A confidentiality breach can turn victory into defeat. Past decisions have penalized people who violated confidentiality. In one high-profile example from 2013, an Ontario arbitrator ordered journalist Jan Wong to repay The Globe & Mail after ruling that she violated the confidentiality clause in the settlement over her termination from the paper.

Another Ontario case ordered a reduction in a settlement after the recipient posted about it on Facebook. In that case, her posts didn’t say anything specific about the settlement, just implications like “… didn't get what I wanted but I still walked away with some...” Regardless, her award was reduced.

If you’ve signed an NDA for work or a settlement, be cautious before disclosing any information related to it. If you’re unsure what’s safe to say, seek legal advice since carelessness could cost you.

Read more:

Trade Secrets & Confidentiality Agreements

Jan Wong and the Globe and Mail