Confidentiality Provisions
Confidentiality provisions (also known as non-disclosure agreements or NDAs) are designed to preserve or protect trade secrets and preserve eligibility of patenting. When drafting confidentiality provisions, it is paramount that the drafter carefully and clearly defines what qualifies as “confidential information.” Such agreements can be infinite in duration so long as the confidential information has not been made public.
Another consideration when drafting confidentiality provisions is not to run afoul of federal or state statutes. For instance, for public companies, the SEC requires that a confidentiality agreement not prohibit an employee from sharing confidential information with the SEC. This is designed to protect and promote whistleblowing. See Rule 21F-17.
§ 240.21F-17 Staff communications with individuals reporting possible securities law violations.
(a)
No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement (other than agreements dealing with information covered by § 240.21F-4(b)(4)(i) and § 240.21F-4(b)(4)(ii) of this chapter related to the legal representation of a client) with respect to such communications.
(b)
If you are a director, officer, member, agent, or employee of an entity that has counsel, and you have initiated communication with the Commission relating to a possible securities law violation, the staff is authorized to communicate directly with you regarding the possible securities law violation without seeking the consent of the entity’s counsel.
It is important to note that the SEC does not have to find that a violation has actually occurred, just that the employer has violated its rules with its confidentiality provision.
The EEOC has a similar concern when it comes to discrimination claims. There has been heightened scrutiny from the U.S. Equal Employment Opportunity Commission over workplace policies and confidentiality agreements that chill employee rights and protections. We should anticipate more guidance from the Biden administration now that Ohr is the new General Counsel. See Unit 18 for more details on including confidentiality provisions in Employee Handbooks.
The NLRB reviews employers’ confidentiality provisions and policies to determine whether employees’ Section 7 rights are being violated. Section 7 of the NLRA provides that employees have the right to form unions and to engage in concerted activity to improve their wages and other terms and conditions of their employment. Section 7 also makes it an unfair labor practice for an employer to “interfere with, restrain, or coerce employees” in the exercise of the rights guaranteed under Section 7. Therefore, the NLRB has sometimes held that the language contained in employer confidentiality policies is unlawful, because it either prohibits or “chills” the exerci