1. Consequences for Breaking Confidentiality Agreements
2. Why Do Confidentiality Breaches Occur

Updated August 14, 2020:

The consequences of a breach of confidentiality include dealing with the ramifications of lawsuits, loss of business relationships, and employee termination. This occurs when a confidentiality agreement, which is used as a legal tool for businesses and private citizens, is ignored. A confidentiality agreement is also known as a non-disclosure or secrecy agreement. These agreements are used to protect company secrets, processes, products, trademarks, and patents. For private citizens, an example of a confidentiality agreement is built into the federal Health Insurance Portability and Accountability Act (HIPAA). HIPAA laws keep all personal medical information private.

Consequences for Breaking Confidentiality Agreements

A breach of a confidentiality agreement results in serious consequences to the parties involved. The actions that can be taken and possible consequences include:

  • Lawsuits.
    • Injunctive relief should be filed in order to have the court stop the party in violation from continuing their actions. Then, evidence of the breach should be gathered to show there has been irreparable harm. The language of most confidentiality agreements states that any breach would be seen as causing irreparable harm.
    • If an employee's confidentiality agreement has been breached, the employer may receive monetary damages from the employee. If the damages can be calculated, the employee may be responsible for the entirety of the loss. For example, if an employee has sold trade secrets to a competitor, loss of market share and revenue may be calculable. The employee may also be responsible for punitive damages.
  • Loss of business clients and relationships.
    • When businesses share services with other businesses, confidentiality agreements are used as a way to protect company secrets, operations, and more.
    • If a breach or violation of the agreement occurs, there can be severe consequences on the business and professional reputations and the loss of current and future clients.
    • The person guilty of the breach may find themselves blacklisted, which can result in the inability to conduct business.
    • The guilty person, who may work in a niche industry, may gain a long-lasting or permanent bad reputation, making conducting business impossible.
    • Any future employers will see the guilty person as a potential liability if they are hired.
  • Termination of employment and more.
    • Employment confidentiality agreements are used by many companies, including those in marketing and advertising products.
    • The employee confidentiality agreement will always state that the employee who breached or violated the contract will be fired. It will also include the stipulation that seeking monetary damages will be pursued. Firing the employee can take place even if an employment contract is in place. The breach will most likely also violate the employment contract.
    • In some situations, the breach of confidentiality will be severe enough to include criminal charges and possible incarceration.
  • Criminal charges.
    • Criminal charges can occur when the breach of confidentiality has severely affected the company.
    • The breach may be seen as theft if it involves intellectual property or information that is proprietary to the company.
    • Fines or imprisonment may be given if theft is proven.
    • The employer will not file the charges; they will come from either the state or federal government depending on the charges.

Why Do Confidentiality Breaches Occur

When survey researchers have looked into how and why data breaches of individuals have occurred they have noted the following:

  • Identifiers weren't removed from questionnaires or electronic files.
  • Cabinets, where information was stored, were unlocked.
  • Electronic files that included identifiers were not encrypted.
  • Conversations about personal data with unauthorized persons occurred.

Due to these potential violations, any agency, private or government, who collects data should properly train employees on guidelines that will prevent breaches from happening.

In other situations, the breach may be due to illegal circumstances. In 1996, employees from the Social Security Department were caught stealing confidential information. The information stolen included people's mother's maiden names, which were then used to open credit cards in the names of New York area residents.

Instances of identity theft are continuing to rise in frequency. Credit card and banking data are frequent sources of these breaches. On the other hand, no evidence has been seen of any carelessness on the part of researchers. In order to prevent further breaches, security measures, proper guidelines, and additional oversight must be in place. It is currently unclear how many people are being harmed by data breaches.

If you need help with understanding the consequences of a breach of confidentiality, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.