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Public dislike of NDAs should not eclipse their value

by | Mar 17, 2020 | Employment Law

Near the end of Michael Bloomberg’s campaign for the Democratic presidential nomination, he suffered some powerful rhetorical hits over non-disclosure agreements (NDAs). The candidate offered little defense of himself or NDAs.

The moment again brought to public attention the significant downsides of NDAs. And again, the upsides of these agreements for all sides of a dispute were effectively swept under the rug. A recent editorial in a Minneapolis-St. Paul newspaper argues that the good NDAs can do should not go down with the ship along with their negative effects.

The downsides of NDAs are significant

Nobody in the debates suggested any changes to laws or policies having to do with these agreements, often signed by both sides of a lawsuit as part of a settlement ending a legal dispute.

Instead, the issue was the use of NDAs by Bloomberg’s company and Bloomberg himself to settle gender discrimination and sexual harassment claims. The number and nature of these claims are unclear, largely due to the NDAs.

And indeed, NDAs do often hide the misdeeds of the powerful and alleviate their incentive to do better the next time. The cash outlays that are usually also part of these agreements may be all that deter future bad decisions and harmful behavior.

NDAs may conceal poor safety practices, dangerous products, environmental lapses and the like, and this is perhaps even more troubling.

Wronged employees sign them for valid reasons

On the other hand, NDAs give employers a way to settle claims instead of feeling they need clear their name by soundly defeating the employee in court, an approach unlikely to benefit an already embattled employee.

And consider that, for some, signing an NDA and accepting a large settlement is the right decision. Can disparaging NDAs sometimes run the risk of disparaging those who agree to them?

An NDA may protect employees from any unfair stigma of being likely to file lawsuits against future employers. Plus, NDAs allow the employees to decide for themselves if they want creditors and ex-spouses to know about a sudden improvement in their finances.

Solutions may balance the downsides of NDAs

Recent laws in some states ban the use of gag provisions in NDAs in public sector employment disputes. After all, taxpayers have a right to know what their tax dollars are paying for. The Minnesota editorial’s author also suggests requiring a judge to approve at least some NDAs.