NEW YORK—Recent workplace sexual harassment and assault allegations, such as those against Hollywood film executives and movie stars, as well as the numerous CEOs and corporate executives, have put employment confidentiality and nondisclosure agreements (NDAs) under the microscope. Can such agreements go too far by keeping victims silent? Businesses that use overly restrictive nondisclosures run the risk of such agreements being deemed unenforceable.

In a New York Times investigation that uncovered widespread sexual harassment allegations against film executive, Harvey Weinstein, some accusers said that they were silenced by the terms of NDAs and confidential settlements.

Businesses commonly have new hires sign NDAs to protect trade secrets, confidential business information, customer lists and other proprietary information. It is also quite common to see confidentiality agreements at the end of the employment relationship in combination with a severance package.

Pre-employment NDAs often include broad prohibitions against comments that could harm the company's business reputation or an employee's personal reputation. However, employers seeking to use these restrictions to prevent employees from discussing illegal activities may find them unenforceable, depending upon to whom the disclosure is made.

For example, the National Labor Relations Board considers it an unfair labor practice for employers to ban workers from discussing their sexual harassment complaints among themselves. Similarly, employees must always retain the right to speak and cooperate with the Equal Employment Opportunity Commission (EEOC) and related state civil rights agencies regarding an agency investigation into discrimination claims.

Employees cannot waive future claims based upon illegal activity that occurred after they signed the NDA, and depending upon the jurisdiction, courts are not likely to enforce any such agreement. Employers risk attracting even more unwanted attention by taking an employee to court over the allegations it is trying to keep confidential. And employers may also find themselves the subject of negative press as both the alleged bad actors and the efforts to hide them come to light.

Businesses oftentimes provide a severance package to departing employees in exchange for a waiver and release of claims, including sexual harassment and other civil rights claims. Businesses generally use such agreements as part of a standard practice to curb litigation and company disparagement.

Recently, however, enforceability may depend on the jurisdiction in question. In my home state of California, the state prohibits the use of confidentiality provisions if the underlying facts could be prosecuted as a felony sexual offense. Other states have passed similar so-called sunshine-in-litigation laws, barring confidentiality agreements that would conceal facts related to a public hazard. As well, a former employee can never waive the state's right to bring a criminal charge against an employer.

A severance agreement will be deemed unenforceable if it attempts to prevent the employee from filing a charge with the EEOC or participating in an investigation, hearing or other proceeding. In addition to the EEOC, other federal agencies also place limitations on what rights can be waived in a separation agreement.
Some legal counsel recommend that it state in the release that "nothing in this agreement prevents you from cooperating with a government investigation."

Notwithstanding all of the proactive attention employers and their legal counsel may take in developing NDAs and severance agreements, the most likely risk that employers face legal counsel is when it comes to pre- and post-employment agreements that may be unenforceable by a particular state.

As we have noted in previous Vision Monday articles on these types of employment law matters, we highly recommend you speak with your legal counsel before introducing, revising, modifying or eliminating any language associated with NDAs and severance and general release agreements.

Hedley Lawson, Contributing Editor
Managing Partner
Aligned Growth Partners, LLC
(707) 217-0979