November 2nd, 2018

In this video I discuss the issue of whistleblowing and Non-Disclosure Agreements, especially the question of whether and how you can blow the whistle if you have signed a Non-Disclosure Agreement?



The following is a rough transcript of the video:

There has been a lot in the news lately about Non-Disclosure Agreements.  Omarose Manigault Newman, former Presidential advisor as well las former reality star has written a book, is giving interviews.  The Trump Administration and Trump Campaign are trying to silence her by enforcing a Non-Disclosure Agreement.  Stormy Daniels is involved with litigation about a Non-Disclosure Agreement that was part of a settlement agreement.  There are reports that the government is currently, routinely using Non-Disclosure Agreements with Federal employees to try and keep them from criticizing the Administration as current employees or once they have left the government.

Non-Disclosure Agreements That Bar An Employee From Reporting Fraud to the Government Are Almost Always Illegal

The thing is, as you look at those reports, the news reports almost always talk about the fact that legal experts say those Non-Disclosure Agreements are probably illegal – that there are a number of laws, but most recently the Whistleblower Enhanced Protection Act of 2012, passed unanimously by Congress, that make it illegal for the government to establish a policy or use a provision in an employment contract to keep government employees or former government employees from taking otherwise legal actions to report fraud – especially to report it to Congress, but also to report it to the Inspectors General, or to engage in other whistleblowing activity.

It’s not just government employees.  There are laws that protect the rights of private individuals to report fraud to the government.  Court’s view it as very high public policy that we want people to be able to report fraud.  Therefore courts will generally hold as invalid provisions in employment contracts or severance agreements that limit an employee’s ability to report fraud to the government.

HIPAA the health privacy law – a very important, very strict law – has an exception that allows of people with access to health care information to share it with their lawyers – carefully –  so that their lawyers can help them report fraud to the government.  That tells you how significant this public policy is.

The Securities and Exchange Commission has recently been fining companies for including in severance agreements or employment contracts provisions that the limit an employee’s ability to report fraud to the government.  And, importantly, the SEC has fined companies even when the SEC acknowledged that the company  never tried to actually enforce these agreements.

So why would that be?  Why is that so important?  The answer is: Because the question of ultimate legality or enforceability isn’t really the key question.  The key question is: What is the objective the companies trying to accomplish and do the agreements meet that objective?

Even Though Illegal, Companies Often Use NDAs To Intimidate Employees To Keep Them From Reporting Fraud

And, as a number of defense lawyers have acknowledged when talking about these things is:

  • NDAs don’t have to be enforceable to be effective.
  • NDAs don’t have the legal work.
  • NDAs work if they keep a whistleblower from speaking out.

They really work if they keep a whistleblower from even talking to a lawyer about whether the NDA is enforceable.  And the way they work is, if they make a potential whistleblower question whether it is worth it to speak up – whether it is worth it in light of the cost of hiring a lawyer to defend them if the company did try and enforce it – the fact that if they were a proceeding that were made public they would be outed as a whistleblower and that could have real negative consequences on their job.

A lot of these agreements include provisions that talk about clawing back your severance payment.  I’ve even seen some that talk about questioning whether they are going to take away part of your 401k – no way can I imagine that being legal, but when you look at it, and you, as someone who is thinking of blowing the whistle, these threats can be really scary.

It is that fear factor, that deterrent effect that a lot of times companies are looking for when making employees sign Non-Disclosure Agreements.

So the question is, for you, if you’re thinking of blowing the whistle but you’ve got one of these nondisclosure agreements, or maybe you are leaving the company, on your terms or involuntarily, and they are asking you to sign one, what do you do?

So what do you do if you want to be a whistleblower but have an NDA?

The short answer is: hire a lawyer to help advise you.  First and foremost, what you really don’t want to do is – having watched a video like this or having read something in the paper say “Ah, these aren’t enforceable, I’m just going to do my thing.”  Because, the fact is, even the laws that say NDAs are generally not enforceable, it is for certain aspects.  So you want to talk to a lawyer and get a sense of what kind of whistleblowing you want to do, what information you have, and the right way to approach it to protect herself. Not just to protect yourself ultimately down the road,  meaning you win in court, but to protect yourself up front to minimize the chance that the company is going to take action against you, and if they do, the burden that is going to place on you.

And actually, there is more to it than that.  Depending on how you do it, if you are thoughtful and cautious about it, you can actually take steps that make it so that the company faces some of those practical burdens.  The company is not going to want publicity.  They are often not going to want their executives to have to be deposed.  There are a number of things like that.  So, depending on how the process goes, it is not just you who bears the burden if you have to contest the validity of one of the NDAs.  That is something else that you want to talk to a lawyer about.

Your Rights and Risks Are Different Depending on the Type of Whistleblowing You Do

Blowing the whistle to the government to report fraud is highly protected.  There are lots of policies and laws that are going to support you in doing that, and the company is going to have a hard time really challenging that.  But blowing the whistle by sharing information with the press, there are also protections, but they are different and you need to be more careful.  Talking to other people, even if it is for good reasons and trying to help public safety or things like that, public policy is going to be supportive, but not as supportive.  And so, again, you need to be careful. You need to be aware that the company is going to try to accuse you of stealing trade secrets, of using it for your own benefit, and you want to avoid situations that look like that.

I should go back, one of the other highly protected ones – and this goes with the government – is reporting to members of Congress.  That is a little different type of whistleblowing; it doesn’t fall under the False Claims Act, but it is one of the ways to blow the whistle that can be very effective and is highly protected.  But again, you want to be cautious about how you do it.  You also really would like to have a lawyer help you because any information you share, including with the government, if you share the company’s attorney-client privileged information – that could be problematic.

So these are all things that you want to think about if you’re thinking about blowing the whistle after you’ve signed a Non-Disclosure Agreement, a confidentiality agreement or if you are being asked to sign one.

So this has been an overview of the issues involved with Non-Disclosure Agreements, confidentiality agreements and blowing the whistle.  Each situation is different, and if you are thinking of blowing the whistle, and have a Non-Disclosure Agreement, or are being asked to sign one, and you would like to get legal advice specific to your situation, please contact me or call me at (207) 747-7639.  I’d be happy to talk to you – free, confidential – talk about your situation.

Also, the disclaimer:

While I hope this video was informative, it is not legal advice and you should not rely on it as such. Watching this video does not make me your lawyer or you my client.