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What You Need to Know Before Signing a Non-Disclosure Agreement (NDA)

Non.Disclosure.Agreement.Lawyer.DPC.3.17.16.jpgIn a recent report, it was uncovered that the Donald Trump campaign has been requiring all volunteers to sign a contract forbidding them from criticizing Trump, his family members, Trump’s businesses or products, or his campaign for the entirety of their lives. While it is common to include non-disparagement and non-disclosure provisions into employment and severance agreements (and setting aside for the moment that these types of provisions don’t generally apply to volunteers), overbroad provisions, such as the ones that the Trump campaign are using, may be deemed unenforceable and have gotten some employers into difficult situations. Our Award Winning New York Employment Agreement Lawyer is often asked to review employment and severance contracts, and discusses some recent developments regarding non-disclosure agreements (“NDA”). (For other discussions related to NDA’s and employment contracts, see our previous blogs here.)

NDA’s (sometimes also referred to as confidentiality agreements) are contracts, generally between employers and employees where, for some valuable consideration, the employee promises to not reveal any sensitive information learned during the course of their employment. NDA’s can be made part of an employment contract, a severance agreement, or even be part of a settlement agreement reached at the conclusion of litigation.

Problems can occur, however, when the NDA infringes on individuals’ abilities to engage in lawful activity, such as reporting claims or cooperating with a government agency’s investigations.

In April of 2015, the Securities and Exchange Commission (“SEC”) announced an enforcement action (the first of its kind for the SEC) against KBR, Inc. based upon improperly restrictive language in the technology and engineering firm’s employment confidentiality agreements. According to the SEC, the language violated an SEC rule, enacted under the Dodd-Frank Act of 2010, which impeded employees’ communications with the SEC. While KBR neither admitted nor denied the allegations, the enforcement action was quickly settled, with KBR agreeing, among other things, to pay a $130,000 penalty and amend their employee confidentiality agreement language.

Nor is the SEC alone. In 2014, the Equal Employment Opportunity Commission (“EEOC”) brought two lawsuits against employers, including one against CVS Pharmacy, alleging that language used in their standard release of claims violated Title VII of the Civil Rights Act because they interfered with employees’ rights to file administrative charges, freely communicate, and participate in investigations with the EEOC and government agencies.

Also in 2014, multiple decisions by the National Labor Relations Board (“NLRB”), including one against Hoot Winc LLC (doing business as “Hooters”) determined that certain employee policies, confidential information and NDA’s, were overbroad and unlawful because they interfered with employees’ rights to engage in activity protected under the National Labor Relations Act.

Best.Practice.Light.Bulb.DOL.Audit.Dollar.Photo.1.18.16.jpgIn light of this and other potential government enforcement actions, employers should review employee agreements and employment policies to avoid any implication that employees are prohibited from reporting issues to government agencies or participating in government investigations. Employers should create and implement best practices on their agreements and policies. On the opposite side of the employment relationship, employees should seek legal counsel before signing any agreement to understand its implications.

If you have any questions or concerns about your employment contracts or policies, contact our NY Employment Law Attorney today for a confidential consultation.

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