Work/Life

What Exactly Is An NDA? Here's What Workers Need To Know Before They Sign.

Nondisclosure agreements were a hot topic in Wednesday night's presidential debate. They are everywhere else in America, too.
More than one-third of American workers are bound by a nondisclosure agreement. Are you one of them?
More than one-third of American workers are bound by a nondisclosure agreement. Are you one of them?

“So, Mr. Mayor, are you willing to release all of those women from those nondisclosure agreements so we can hear their side of the story?” Sen. Elizabeth Warren (D-Mass.) asked former New York City Mayor Michael Bloomberg in a fiery highlight of Wednesday’s Democratic presidential debate.

Warren was referring to employees of Bloomberg’s financial services company who signed nondisclosure agreements after settling complaints or lawsuits over his company culture and, in some cases, Bloomberg’s own behavior. In January, ABC News reported that multiple women bound by these confidentiality agreements wanted to publicly discuss working for Bloomberg but feared retaliation.

After his late entry into the presidential race, Bloomberg has faced intensified criticism for his company’s use of NDAs and his alleged treatment of female employees. Nearly 40 harassment and discrimination suits from 64 employees have been filed against the candidate and his company over 20 years. In one famous example, Bloomberg reportedly told a saleswoman at his company to “kill it” after she disclosed her pregnancy to him, according to court filings.

During the debate, Bloomberg sidestepped Warren’s question by claiming there were “very few nondisclosure agreements,” but would not state how many when she pressed for a number. He later minimized the women’s accusations by saying, “Maybe they didn’t like a joke I told.”

Presidential hopefuls are not the only ones discussing NDAs. The legal tool is a common feature of American corporate bureaucracy, even outside the realm of settlements and legal disputes.

“[Workers] encounter them not only in the context of the debate yesterday, which was about when there is a dispute or allegations, there can be a settlement either before or after filing in court. That kind of NDA is a confidentiality agreement agreeing not to talk about the allegations,” said Orly Lobel, a University of San Diego law professor who has argued that the use of nondisclosure agreements is getting out of control. “Most employees will encounter [one] even before that when they join a company. They typically sign very broad, blanket standard-form NDAs ... [with] very broad restrictions about what they can say and do.”

Over one-third of American workers are bound by an NDA, Lobel wrote in Harvard Business Review, citing an analysis by Vanderbilt University Law School. Maybe you’ll be next. Here’s what you need to know before you sign one.

So, what exactly is an NDA?

Reporting on the Me Too movement showed how men in power, like Harvey Weinstein, can use nondisclosure agreements to settle accusations of sexual harassment and discrimination and keep the information from ever going public.

But NDAs are also a standard feature in employment contracts. Businesses claim they provide a competitive advantage by limiting the amount of valuable information, such as trade secrets, that can travel or be shared outside the office when an employee works for them or moves to a competitor.

But critics like Lobel argue that NDA language is overly broad and causes job monopolies that stifle creativity and free speech, reduce pay transparency and limit workers’ career opportunities.

“Originally, it was really about technical abilities, algorithms,” Lobel said. “It’s really expanded to business strategies, pricing, customer lists,” she added, noting other examples of how NDAs have been used to prevent employees from discussing their salaries or disparaging the company.

There are some legal limits and exceptions to NDAs, though. An NDA won’t prevent someone from reporting illegal activity or assisting in an agency investigation, for example, Lobel said.

“The big problem is that there’s a very big gap with what the law allows you if it gets to that point, versus what employees understand when they look at these NDAs,” she said. “We don’t know about all the people who are just reading the black-letter language of the contract and not challenging it and being risk-adverse because it says [they] can’t speak.”

Several states have introduced legislation to restrict the power of NDAs, and New Jersey has gone one step further by banning the enforcement of NDAs in settlement agreements and employment contracts.

Are they good or bad for you to sign?

In her debate exchange with Bloomberg, Warren described his NDAs as someone “being muzzled.” This is what critics of NDAs argue: Their secrecy tactics are bad for job competition and bad for victims who are silenced and are unable to warn future victims, allowing cycles of abuse to continue unchecked.

Former Weinstein assistant Rowena Chiu, who signed an NDA, told the Financial Times that she does not believe they should be used in cases of sexual harassment or assault. “I think in a situation like this where the power imbalance is so great and a law firm can use its money and power and authority to protect a high-net-worth individual who has actually committed a crime that no, there is no place for it,” she said.

“From my perspective as a public scholar whose interests are to proactively and long-term create better work environments, I do think that’s a desirable development with doing away with these NDAs,” Lobel said.

But whether to use NDAs is not always a black-and-white issue for those involved in cases of harassment or assault. During the debate, Bloomberg countered that the agreements were made “consensually,” mentioning accusers’ “right to expect that they will stay private.” He is not alone in advocating for their value in this way. Defenders of NDAs say they offer desired privacy, not forced silence. Two civil rights lawyers wrote a Washington Post opinion piece against an absolute ban of NDAs, arguing they are a valuable guarantee that a “harasser and co-workers will not be able to share painful, sometimes highly intimate, details about past events.”

“Mike Bloomberg should have been ready for the question, and prepared to free anyone who wants to be freed [from an NDA]. But they get freedom at their own peril. I wouldn’t recommend it,” said Donna Ballman, a Florida-based employment attorney. She cited future employment risks and the ability to negotiate among reasons employees don’t want settlement agreements to be made public.

“Many employers are willing to negotiate because they don’t want the allegations to become public,” Ballman said. “That’s the ugly side of NDAs, but it also gives employees leverage to negotiate a quicker settlement than had they filed a public lawsuit.”

An NDA may be good for certain individuals, but harmful to the larger society, in other words.

“There is some tension here with the interest of the public to know, for example, with a presidential candidate. We definitely want to know what his interactions have looked like with women and what kind of allegations have been brought against him versus the interest of some plaintiffs,” Lobel said.

Is it possible to speak out despite your NDA?

Using the court of public opinion is one strategy to speak out even after you sign an NDA. Presidential candidate Pete Buttigieg recently said he was unable to speak about his past work at the consulting firm McKinsey due to an NDA, for example. After Buttigieg was pressured, and due to his high profile, McKinsey released him from it.

After the Weinstein story fueled public outrage, the film producer’s company eventually filed for voluntary bankruptcy and released “individuals who suffered or witnessed any form of sexual misconduct by Harvey Weinstein from telling their stories.

“Public opinion of how outrageous it is to sign these kind of things and try to enforce them have led companies to not try to then sue for breach of that contract,” Lobel said. “Another way is to get an injunction from a court saying that this is an unenforceable secrecy clause that’s against public policy because the public has a right to know.”