Predatory NDAs Just Got a Lot Harder To Enforce

The topic of nondisclosure agreements (NDAs) has been the perennial runner up in our Patreon polls for future article topics for years. They’ve been edged out at least four times by sexier, more topical topics. But today they’re finally getting their place squarely in the middle of the sunbeam that is my attention!

Much like Piggy and I, NDAs have been running amok for about thirty-five years, getting stronger and more belligerent all the time. But unlike us, it seems they’ve peaked.

Within the last six months, three major changes have drastically reduced the enforceability of predatory NDAs.

These changes provide general protection to all impacted employees, and specific protections for victims of sexual harassment. With this, it seems the power and popularity of predatory NDAs is finally waning. And workers are gaining back ground they never should’ve lost.

What are nondisclosure agreements?

A nondisclosure agreement (NDA) is a legal contract between two parties to protect sensitive or confidential information. Although they have other applications, we’ll talk about them today in their most common context: between an employee and their employer.

Basically, if you sign one, you’re agreeing to keep company secrets. Hopefully the nature of the secret is something neutral, like trade secrets. (Though they’ve also been used to keep negative stories under wraps—we’ll get into that.)

There are two basic kinds of agreements: unilateral and bilateral. A unilateral agreement is more common. It restricts only one party from disclosing the information. The employee needs to keep quiet, but the company can still say whatever they like. A bilateral agreement (also called a “mutual agreement”) means both parties are legally bound to keep quiet.

NDAs sometimes include a non-disparagement clause. If you sign a non-disparagement clause, you’re agreeing not to talk shit about the company. If you sign one, you can’t blast them on social media, leave negative Glass Door reviews, or talk to journalists about your time there.

Who and what do NDAs protect?

I’ll give you an easy example of how NDAs should work.

Let’s say I work at Willie Mae’s Scotch House, the legendary New Orleans restaurant serving fried chicken so delicious it makes me sad to eat it. (Obviously this is hypothetical. We all know that if I were ever hired by this fine institution, I’d be fired within an hour for asking too many customers if they’re gonna finish that.)

Obviously, Willie Mae’s has unique processes that make their product different than everyone else’s trash chicken. What’s it marinated in? How long does it fry, and at what temperature? What kind of delicious drugs are mixed into the breading to so thoroughly ruin all other fried chicken for me, forever?

These are trade secrets. They’re exactly what NDAs are designed to protect. Employees need to know them to perform their job duties. But if Colonel Sanders or the homophobic dweebs down at Chick-fil-A ever got their hands on these secrets, Willie Mae’s would be done. Our laws are designed to protect entrepreneurial creativity.

Given this, it’s reasonable for Willie Mae’s to have their chefs sign a unilateral NDA. You can’t get fired, then run to YouTube with your hot new video “10 Willie Mae’s Secrets REVEALED! (#7 Blew my MIND!!)”

… Although if you did, I would indeed like, subscribe, and hit the bell for notifications.

Predatory NDAs

So that’s how legal nondisclosure agreements are supposed to work.

Unfortunately, NDAs have gone off the rails over the past few decades.

There are several things that can make NDAs predatory. First, when they’re unnecessary. NDAs used to be limited to situations where companies actually needed the protection. Now, over a third of all American workers are bound by an NDA. In our analogy, this would be like Willie Mae’s asking their toilet paper supplier to sign an NDA. Like… why, dude?

Second, an NDA is predatory if it’s too broad. Companies have argued that general knowledge can constitute a “trade secret.” This would be like Willie Mae’s trying to forbid their departing chefs from frying any food, at any other restaurant, in perpetuity, because they practiced that skill at Willie Mae’s. It deters employees from changing jobs because they aren’t sure what’s legally allowed.

“Is an engineer supposed to get a frontal lobotomy before they go on to the next job?”

– Judge William H. Aslup, Waymo v. Uber

Third, companies have often inappropriately leveraged their power over employees to force them to sign NDAs. When you sign an NDA, you’re waiving important rights granted to us by law. In some cases, they forbid you from even saying that you’ve signed an NDA! That’s something no one should be forced to do because they’re desperate for money, employment, or legal protection. And they’re a totally inappropriate way of shielding company misdeeds (sometimes of the illegal variety) from public knowledge.

What’s changed recently?

When NDAs become a standard part of employment contracts, everybody suffers.

People—with no special industry knowledge or access to legal counsel—sign them without fully understanding or agreeing with them. Those workers may not realize the scope of the rights they’re giving up, or the historically dubious enforceability of these contracts. They almost certainly don’t have the money to hire lawyers to go toe-to-toe with their employer to fight it.

“Fraud is not a trade secret. I refuse to allow bullying, intimidation and threat of legal action to take away my First Amendment right to speak out against wrongdoing.”

– Tyler Shultz, whistleblower and all-around icon of using privilege for good

Most workers get scared in the face of a legally binding NDA. They stay put and stay silent—even when silence is not optimal, enforceable, or required. For many companies, that fear isn’t a bug but a feature. That’s why I’m thrilled to tell you about three recent changes that have weakened NDAs across the board.

Big change #1: NDAs can no longer be used to silence victims of sexual harassment

The Speak Out Act was signed into law in December of 2022. It prohibits the enforcement of NDAs signed before instances of sexual assault or harassment. Meaning, employers can no longer use NDAs as a fig leaf to cover up illegal harassment.

This is a critical step in dismantling unethical applications of NDAs. Before, employees who worked at companies that made them sign NDAs couldn’t know that others were experiencing the same harassing behavior. If a victim thinks they’re the only one being harassed, they’re much less likely to try to bring their abusers to justice. Silence also allows the abuse to perpetuate, as people don’t feel free to warn others or talk to journalists who want to bring these critical stories to light. (See the entire Harvey Weinstein nightmare.)

There are limitations, of course. It’s not retroactive, and it doesn’t apply to post-dispute NDAs that are part of a legal settlement. Still, I’m thrilled that if companies want your silence, they need to pay handsomely for it.

Big change #2: NDAs can no longer be used as a condition of severance payment

Tfw you realize you’ve written hundreds of articles about personal finance, and none of them are about severance pay?! All right, all right, consider it added to my neverending to-do list…

When an employee is laid off or fired, many companies offer them severance pay. It’s a little extra pay to smooth over the hurt of being broken up with. A consideration I would’ve appreciated from my last girlfriend, heyoooo—!

But most of these offers are conditional, requiring you to sign an NDA with a non-disparagement clause. Because nobody wants their ex-employees running to social media with sob stories about how heartlessly they were cut loose, or bulleted lists of all the workplace safety violations sent to local journalists. If you don’t sign, no money for you.

… Until February of 2023, when the National Labor Relations Board decided that this coercive shit was not gonna fly anymore.

The board ruled that “simply offering employees a severance agreement that requires them to broadly give up their rights under Section 7 of the Act violates Section 8 of the Act.” Section 7 protects a worker’s right to organize, unionize, and bargain collectively—and Section 8 forbids employers from punishing workers for exercising those rights.

This is part of a bigger and long overdue trend toward stronger labor laws (long may they reign). And unlike the Speak Out Act, it is retroactive within six months.

Big change #3: Some states are banning NDAs altogether

Just last week, Governor Jay Inslee of Washington signed the Silenced No More Act into law.

Starting in June of 2023, employers in Washington state may no longer ask workers to sign NDAs or non-disparagement contracts if the employee has been subject to illegal behaviors. That includes discrimination, harassment, retaliation, workplace safety violations,and motherfucking wage theft, aka America’s leading form of theft!

Washington isn’t alone. Over a dozen states have passed NDA reforms in recent years. They include Arizona, California, Hawaii, Illinois, Louisiana, Maine, Maryland, Nevada, New Jersey, New Mexico, New York, Oregon, Tennessee, Vermont, and Virginia.

Many of these laws were inspired by the #MeToo movement. Speaking publicly about harassment and abuse is incredibly difficult—even dangerous. But we’re all benefiting from the sacrifices made by brave people who’ve come forward to raise awareness and demand change.

We live in the age of job hopping. People live and work longer than ever, and it’s become normal to change jobs and careers many times over our lives. The average job tenure has gotten shorter and shorter. It’s no longer tenable to tie employees’ hands with unfair, legally dubious NDAs. We hope to see them continue to trend downward in the years to come.