What to Do If an Employee Violates a Non-Disclosure Agreement

A Non-Disclosure Agreement (NDA) is a foundational legal tool that protects your company’s sensitive information—such as trade secrets, client lists, proprietary processes, and strategic plans—from unauthorized disclosure. When an employee breaches an NDA, the risks to your business can be severe, including loss of competitive advantage, financial harm, and damaged client trust. Acting quickly and methodically is essential to minimize harm and enforce your rights.

1. Confirm the Breach

Thoroughly examine the NDA document alongside the employee’s behavior to confirm a violation. Begin by understanding the exact terms of the NDA: what information is protected, the scope of confidentiality, duration, and any exceptions. Then carefully review the actions or communications that may constitute a breach. For example, did the employee share confidential data with a competitor, leak it on social media, or use the information for personal gain?

Gather concrete evidence such as emails, text messages, witness statements, or access logs that clearly demonstrate unauthorized disclosure or misuse. Without solid proof, it may be difficult to enforce the agreement or justify legal action. Be sure to document your findings meticulously to establish a clear timeline and connection between the breach and the harm caused.

For foundational knowledge, see the U.S. Small Business Administration’s NDA overview, which explains common NDA provisions and legal considerations.

2. Preserve Evidence

Securing and protecting all evidence related to the suspected breach is critical to support your claims and avoid accusations of spoliation (destruction of evidence). This includes saving copies of all relevant emails, internal communications, digital files, and any physical documents. You may also want to preserve metadata or system logs that show when and how confidential information was accessed or shared.

Store evidence in a secure location, preferably with restricted access, to prevent tampering or accidental deletion. Early preservation helps ensure that you maintain the integrity of your case if it escalates to litigation or settlement negotiations.

3. Notify the Employee in Writing

Issue a formal written notice to the employee to clearly communicate the breach and your expectations. This letter should outline the specific NDA provisions that were violated, detail the evidence you have, and demand an immediate cessation of any further unauthorized disclosures or use of confidential information.

A written notice serves multiple purposes: it puts the employee on official notice of the violation, gives them a chance to correct their behavior, and establishes a paper trail showing that you have taken reasonable steps to enforce the agreement. Sometimes, this step alone can prompt the employee to comply without further legal involvement.

4. Evaluate Damages

Assess the full scope of harm the breach has caused to your business to determine your next steps. Consider both tangible and intangible damages:

• Financial losses: Lost sales, contracts, or opportunities directly linked to the disclosure.
• Competitive harm: If trade secrets or proprietary methods have been exposed to rivals.
• Reputational damage: If client trust or brand image is compromised.
• Operational impact: Costs related to investigating the breach or enhancing security.

Quantifying these damages can be complex, but a precise valuation is crucial if you seek monetary compensation or other legal remedies. Your attorney may help you consult forensic accountants or industry experts to calculate losses accurately.

5. Seek Legal Remedies

With your attorney’s guidance, explore appropriate legal actions to stop further harm and recover damages. Potential remedies include:

• Injunctions: Courts can issue orders immediately prohibiting the employee from continuing to disclose or use your confidential information, preventing further damage while the case proceeds.
• Monetary Damages: If you can prove actual financial losses due to the breach, you may recover compensation through a lawsuit or settlement.
• Settlement Negotiations: Often, disputes resolve outside of court through negotiated agreements that may include confidentiality provisions, monetary payment, and commitments to cease certain activities.

Early legal intervention is crucial to preserve your rights and strengthen your bargaining position. Engaging counsel experienced in business law and trade secret litigation can help tailor your approach for the best outcome.

For more on handling complex disputes, review business law team article.

6. Strengthen Future Protections

After resolving the current incident, take proactive steps to reduce the risk of future breaches. This might include:

• Updating your NDAs to close any loopholes or clarify ambiguous terms.
• Conducting employee training sessions to reinforce the importance of confidentiality and legal obligations.
• Implementing stricter access controls, such as limiting who can view sensitive information, using encryption, or deploying monitoring software.
• Periodically reviewing your company’s data security policies and practices.

Continuous improvement in your protections helps create a culture of confidentiality and reduces vulnerability to insider threats.

The U.S. Patent and Trademark Office offers valuable intellectual property protection strategies relevant to trade secrets.

7. Importance of Legal Counsel

An experienced business law attorney is indispensable in navigating NDA breaches effectively. They can:

• Analyze the strength of your case based on the facts and applicable laws.
• Advise on the most strategic course of action tailored to your business goals.
• Handle communications and negotiations with the employee or their legal representatives.
• Represent you in court if litigation becomes necessary, ensuring procedural compliance and advocating vigorously on your behalf.

Early involvement of counsel not only increases your chances of success but can also prevent costly mistakes that weaken your position.

Conclusion

An NDA breach threatens your company’s most valuable intellectual assets and competitive position. By promptly confirming the violation, preserving comprehensive evidence, communicating clearly with the offending employee, and pursuing appropriate legal remedies with skilled counsel, you can protect your business’s future and deter further misconduct. Additionally, strengthening your confidentiality safeguards helps build resilience against ongoing risks.