Is it legal to backdate an agreement?

Question

On Workplace.SE, "My employer wants me to a sign an NDA that is backdated more than 2 years" describes the following scenario:

• OP is an employee working on a project
• OP has been working (for 7 years as an employee and for 2 on this project) without an NDA
• Their employer now wants them to sign an NDA for the project, backdated two years (i.e. dated two years ago to the start of the project).

The OP's jurisdiction is presumably Texas.

My question, is it legal to backdate an NDA like that? Is it a civil contract whose parties are allowed to agree (even retroactively) than an NDA is in place? Or could doing so (backdating such a document) be considered fraud, forgery, or anything illegal, or even for some reason ethically or morally wrong?

It seems to me that it might be legal (assuming that I as the employee were willing to sign it) because as an employee I'd assume that some NDA was in place even if haven't signed one (so it's as if the agreement or meeting of minds was in place even before it was documented).

On the other hand it also appears to be creating a false document, so, I don't know.

Answer 1

Generally you can back-date the effective date of a contract. Texas does not have any specific laws that prohibit it and in contracts law, this concept is called the "relation back" theory of contract effectiveness. See Grubb & Ellis Co. v. Bradley Real Est. Trust, 909 F.2d 1050, 1054 (7th Cir. 1990) for an explanation that back dating violates no general contract law principles and is "determined by the intent of the parties as deduced from the instrument itself."

Aside from the obvious issues where someone is back-dating a contract to commit some type of fraud, back-dating raises a whole host of unforeseen consequences with regards to a party's performance under the contract as well as the rights of third parties.

The best practice is to make it clear that the effective date and the execution date are different. This avoids confusion and ambiguity that could call the enforceability of the contract into question.

Some of the issues that arise when back-dating a NDA are:

• Liability for disclosures the employee made between the effective date and when the contract is executed/signed. This is particularly troublesome if the NDA provides for liquidated damages or imposes other penalties.
• If the effective date and execution date are not clear, there might not be a “meeting of the minds.” (The essential elements of a contract are offer, acceptance, consideration, and meeting of the minds.) This is a problem for the employer more than the employee.
• Liability to third parties. Say an employer licensed some technology from a third party and everyone working on the project was required to sign NDAs. Employer could be on the hook here. Also, the employer and employee could both be in trouble if they were back-dating the contract to trick the third party into thinking it had been signed all along. The issue here is fraud.

So, the bottom-line is that is generally legal/enforceable, but one should have a clear explanation for the difference in the dates.

Answer 2

There are cerci stances where this could be fine and circumstances where it won't be. In any event it would be legal to the extent that it doesn't involve criminality but may render the agreement unenforceable.

It would clearly be fine if the document simply formalised a NDA that the parties agree had been in force as a verbal agreement all along.

Where it gets trickier is if it is a new agreement it needs to deal with events that may have already occurred. For example, if the employee has already disclosed information, how will that be dealt with?

Further, there is the issue of consideration - what does the employee get for not disclosing? The wages they have had in the past is not good consideration - past consideration is not consideration.