Are Nondisclosure agreements relevant and necessary?

March 8, 2020

Nondisclosure agreements have gained attention recently.

These agreements started to receive more widespread awareness during the start of the #MeToo movement.

Now NDAs have received additional focus as a result of the Democratic presidential debates.  Sen. Elizabeth Warren of Massachusetts called for former New York mayor Mike Bloomberg to release three women from NDAs who accused him of saying inappropriate things in the workplace.

The discussion around the relevance and necessity of eradicating confidentiality or nondisclosure agreements is not as simple as it sounds. There is no one size fits all and these agreements are not all written the same.

For instance, 13 states during the 2019 legislative session limited or prohibited employers from requiring employees to sign nondisclosure agreements as a condition of employment or as part of a settlement agreement, according to the National Women’s Law Center.

Virginia was among those states that took some action, albeit quite limited.

In 2019, Virginia codified certain nondisclosure agreements as a violation of public policy.

The law provides, “No employer shall require an employee or a prospective employee to execute or renew any provision in a nondisclosure or confidentiality agreement that has the purpose or effect of concealing the details relating to a claim of sexual assault pursuant to [certain criminal code sections] as a condition of employment. Any such provision is against public policy and is void and unenforceable.”

It further adds, “This section shall in no way limit other grounds that exist at law or in equity for the unenforceability of any such agreement or any provision of such agreement.”

Without the freedom to enter into an NDA, some employers may not agree to settle a case and will simply take the risk of litigation knowing they will likely prevail. Few litigants have the resources to see a case through the federal court system.

Prohibiting NDAs in negotiated settlements also would negatively impact the opportunities provided through mediation offered by the U.S. Equal Employment Opportunity Commission, where the agency charged with enforcing civil rights laws boasts its success in mediating disputes.

Through this process, those involved to a charge of discrimination statement voluntarily agree to negotiate a resolution without further processing. The parties typically enter into NDAs.

The EEOC’s website touts, as a benefit to mediation, the confidential nature of the process. “All parties sign an agreement of confidentiality. Information disclosed during mediation will not be revealed to anyone, including other EEOC investigative or legal staff.”

Claimants rarely object to the NDA because they typically desire the matter resolved with the same level of confidentiality.

A significant reason people don’t come forward to complain about harassment is due to fear of retaliation or the complaint being disclosed.

In some ways, the NDA promotes the likelihood that people will come forward and resolve their complaints.

NDAs are generally enforceable by both parties.

In 2017, for instance, a former head of a private high school in Florida found out the hard way.

Under the settlement, the former head and the private school entered into a confidentiality provision, with the details of the settlement and settlement amount, were to remain confidential. The headmaster told his teenage daughter about the settlement and she took to social media bragging about it.

The high school sued to enforce the agreement, and the court ruled that the former headmaster had to return the $80,000 settlement due to a breach of the agreement.

Overall, laws that flat-out prohibit mutual and negotiated agreements only take away freedom and decision-making. It will discourage negotiated settlements and will likely result in less relief for victims.

A law prohibiting such a provision will not change the reality that settlements are less likely without them.