Do your confidentiality and nondisclosure agreements violate Federal law?

by Michael Haberman on May 13, 2015 · 0 comments


Federal agencies are clamping down on policies that are overly broad in prohibiting employees from engaging in protected activities.

Federal agencies are clamping down on policies that are overly broad in prohibiting employees from engaging in protected activities.

Most companies try to protect proprietary information by having employees sign confidentiality and nondisclosure agreements. Unfortunately in the eyes of various regulatory agencies these agreements are considered to be too restrictive and violate various aspects of federal law.

Violated provisions

According to attorney Andrew Trimble of McBrayer, McGinnis, Leslie & Kirkland, PLLC, there are three areas that the federal government has objections to: whistleblowing; provisions that seem to prohibit employees from talking to investigators; and provisions that seem to hinder employees from engaging in protected activity. Three agencies in particular have brought actions against employers for these overly broad agreements and policies. The SEC (Securities and Exchange Commission), under The Whistleblower Protection Enhancement Act of 2012, has brought suit against a company for overly restrictive language in its confidentiality agreements. They said this language appeared to prohibit employees from reporting any wrong doing on the part of the company, which of course, what whistleblowing is all about.

The EEOC has brought suit against companies for language in separation agreements that prohibit “nondisparagement”, which in my experience is fairly common language in these agreements. The EEOC said this language seems to prohibit employees from talking to the EEOC about the company.

The National Labor Relations Board (NLRB) has also made headlines with its actions against companies that have language in their policies and agreements that seem to squelch or chill the Section 7 rights of employees under the National Labor Relations Act. That has made headlines enough that I even conduct a webinar to help employers understand how things have changed.

Another agency that might get into the fray at some point, is OSHA, which has very pointed whistleblower provisions and protections.

The remedy

There is an old joke that basically has a patient visiting the doctor and saying “It hurts when I raise my arm. What should I do?” The doctor’s response is “Don’t raise your arm.” The cure for many of these violations is of a similar nature. Don’t have overly broad, all-encompassing policies. Attorney Trimble recommends:

employers should narrow the types of information to which confidentiality provisions apply. Agreements should also include carve-out language that makes clear to employees that any rights or protections available to them under whistleblower or employment laws are not hindered in any way by these terms of the agreement. Provisions should explicitly state that employees also may participate in agency investigations. This carve-out language should be bold and prominently-placed.”

The NLRB suggests language that says “Nothing in this policy is intended to inhibit an employee from exercising their rights under Section 7 of the National Labor Relations Act” or something similar.

A review is necessary

With the clamp downs that are occurring on multiple levels by multiple agencies it is important that every HR department or company review their policies and agreements to insure that the language used does not prohibit employees from exercising the rights granted to them by federal law. There are plenty of opportunities to get some guidance, including your lawyer, so there is no excuse. As a familiar commercial says “Just do it.”


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