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A confidentiality clause prevents legal teams and other members of a case from discussing certain facts related to a settlement. Some people don’t want the amount of the settlement disclosed publicly while others don’t want the details of the case to be made available. A confidentiality clause details exactly what cannot be talked about or released to the media.
Defendants often prefer confidentiality clauses so external parties aren’t aware of their situations. They might not want their reputations damaged or details of their finances made public. While these clauses provide privacy and security to all parties involved in the case, they aren’t always the best option. Review these considerations when faced with a settlement to decide whether signing a confidentiality agreement is the right choice.
Legal Implications of a Confidentiality Clause
Both defendants and plaintiffs must agree on confidentiality clauses and sign them before the settlement is complete. Each party must understand what they are agreeing to before moving forward.
Plaintiffs want to make these clauses as specific as possible to avoid confusion about what remains private. However, defendants often want to make these clauses broad to protect themselves. Professional legal teams should go over these clauses in detail with their clients to clear up any confusing terminology.
Not only do both parties need to know what confidentiality clauses include, but they also should be aware of any consequences that come with breaking them. If you are faced with a confidentiality clause that you aren’t sure about, meet with your legal counsel to discuss it.
Understanding the Legal Framework Surrounding Confidentiality Clauses
The content that both parties agree to make confidential is only one aspect of these agreements. Confidentiality clauses can also have time limitations that restrict how long both parties have to keep the terms of the settlement secret. Some of these clauses are open-ended, which means they are confidential forever, while others expire in a few years. If a plaintiff signs one of these clauses on the defendant’s request, they can break their silence once the agreement period ends.
If confidential information is disclosed, it cannot be undisclosed. This makes it part of the public record and the clause is nullified.
The legal framework for these agreements varies by the type of cases they pertain to and the states where the settlements are filed. For example, the Oregon Workplace Fairness Act prevents employers from forcing employees to enter into confidentiality agreements when the company settles discrimination and sexual assault suits.
Potential Legal Consequences of Breaching a Confidentiality Clause
A key part of most confidentiality agreements is the consequences of breaking them. The side that breaks the agreement will face fines for the breach of contract and might have to pay the legal bills of the opposing party. In some extreme cases, the person who breaks the confidentiality clause may receive a prison sentence.
The Pros and Cons of a Confidential Settlement
Confidentiality agreements come with benefits and drawbacks for everyone involved. Learn more about this option before you agree to sign one.
Benefits of a Confidential Settlement
There are several reasons to consider signing a confidentiality agreement if you’re reaching a settlement with another party. These can benefit you financially and your representation may use them as a tool to guide the other party to settle in your favor.
- Immediate resolution: If one party wants a confidentiality agreement, you can move the case forward by agreeing to it. Once the case is over, the details are private so no one will talk about it.
- Privacy: The details of your case won’t be made public, which can protect your privacy and preserve your reputation. If you receive a large settlement, confidentiality clauses can prevent scammers and predators from trying to take your money.
- Potential for higher settlement amount: Your goal is to maximize your settlement. If the plaintiff knows the settlement is private, they might be willing to accept a higher amount because they know other defendants won’t use your case to set a precedent.
Plaintiffs can use these clauses as negotiating tools when working with defendants. This is a non-tangible aspect of the settlement that can have a big impact on both parties.
Drawbacks of a Confidential Settlement
Your legal team should go over any potential limitations and drawbacks of agreeing to a confidentiality clause. Here are a few reasons why some plaintiffs refuse to sign these agreements.
- Restrictions on speech: Signing a confidentiality clause voluntarily limits your free speech and prevents you from discussing the case in relation to similarly important matters.
- Potential for public ignorance of wrongdoing: The defendant can protect their reputation, which means others might not be aware of how dangerous they are and fall victim to their behavior as well.
- Penalties for disclosure: Even accidental disclosure can result in fines and significant costs.
There’s also a significant potential psychological impact of the victim being compelled to remain silent. They still need to act on the wishes of the party that hurt them and aren’t able to share their experiences to warn other potential victims. This is the basis of the Oregon Workplace Fairness Act updates: plaintiffs can talk about toxic workplaces to warn others of potential harassment and discrimination.
Considerations Before Agreeing to a Confidentiality Clause
As you weigh the pros and cons of confidentiality agreements, look into specific considerations related to your settlement. Each case is different and has multiple factors that determine whether one of these clauses is fair. Here are some important factors ranging from the length of the agreement to the penalties.
Assessing the Length of the Contract
Review the proposed timeline that the defendant wants the confidentiality agreement to last. You can negotiate a reasonable timeline if speaking up about the case is important to you.
An open-ended timeline can weigh on a plaintiff’s well-being because they will never be able to discuss the settlement and potentially advocate for others.
Understanding Penalties for Breach
The penalties for the breach can also determine how safe you feel signing one of these agreements. Few plaintiffs want to go through the lawsuit process again because they violated their contracts and even fewer can afford to pay hefty fines if they’re found guilty of disclosing private information.
If you’re worried about disclosing the details of the settlement, consider working with your legal team to create statements for you. They can be your direct contact with the media or any discussions about the case to prevent you from slipping up.
Evaluating the Type of Concealed Information
Finally, make sure you have a clear understanding of the types of information you cannot disclose. Accidents happen and legal jargon can be complicated, so your legal team should walk through every detail of the clause.
For example, if you settle a personal injury case, you likely won’t be able to disclose how much you were awarded or how the company was negligent in keeping you safe. If a company is acting unethically, some believe the public deserves to know. Signing a confidentiality clause protects the organization and allows it to keep operating with the same dangerous practices.
Know your options with a confidentiality agreement and take steps to protect yourself, your privacy, and future plaintiffs. Seeking legal guidance from The Gatti Law Firm can provide you with the knowledge and support you need to ensure a successful outcome.
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