17

April, 2023

Rethink Employee Confidentiality Clauses as Fed Agency Restricts Scope Nationwide

How do you keep your core business interests and the goings on at your organization confidential when it feels like those strictures are under attack from multiple government entities? It may be time for you to redefine your priorities with respect to confidentiality.

Siege on Confidentiality and Non-Disparagement Clauses

There has, indeed, been something of a siege on confidentiality and non-disparagement clauses in the past five years. Originating with the #MeToo movement and disgust over the behaviors that had been quietly resolved through agreements that ensured the offending conduct would not be discussed with others, legislatures initially at the state, and more recently at the federal, levels have been passing laws prohibiting employers from binding employees to such agreements. As we discussed in our prior articles earlier this year (on federal and New York State confidentiality clause restrictions, multi-state compliance, and contractor agreements), the legislatures have not necessarily limited their restrictions to the types of behaviors reported in #MeToo. Rather the most recent laws go well beyond sexual harassment and sexual assault, to preclude limitations on disclosure of any potentially unlawful workplace behavior.

The myriad variations in these laws can make for cumbersome drafting of confidentiality and non-disparagement clauses, with multiple carve-outs and exceptions. Enter, then, the latest developments in this area, a recent decision by the National Labor Relations Board (the Board) and interpretive guidance issued by the Board’s general counsel, and it may be tempting for some employers to throw their hands in the air.

Recent Board Decision Adds Further Restrictions

In McLaren Macomb, 372 NLRB No. 58 (Feb. 23, 2023), the Board determined that the confidentiality and nondisparagement clauses embodied in an employer’s severance agreements were unlawful because they had a chilling effect on employees’ exercise of their “Section 7 rights” (essentially the right to organize collectively with regard to the terms and conditions of employment as provided under the National Labor Relations Act (NLRA)).

The clauses at issue included:

  • a provision that the terms of the Agreement should be kept confidential as to third parties and not be disclosed except to a spouse, for tax or legal advice, or as compelled by a court or administrative agency;
  • a provision that “information, knowledge or materials of a confidential, privileged, or proprietary nature” known to the employee through the employee’s job should be kept confidential; and
  • a prohibition against statements to employees or the general public that could disparage or harm the image of the employer or any of its affiliated entities and individuals.

The Board determined that the nondisparagement clause had an unlawful chilling effect on employees’ exercise of their Section 7 rights because:

  • it was not limited to matters regarding past employment with the employer;
  • it was not limited to criticism of the employer’s product or services;
  • it applied not simply to the employer but also to affiliated entities and individuals;
  • it was not time bound;
  • it was broad enough to preclude employee conduct regarding a legally protected labor issue or terms and conditions of employment; and
  • employees have a clear legal right to publicize labor disputes provided they do not do so in a manner that is too “disloyal, reckless or maliciously untrue.”

The Board similarly determined that the confidentiality provision was unlawful because it prohibited disclosure to any third person, with limited exceptions.  The Board reasoned employees thereby would be inhibited from filing an unfair labor practice charge or assisting a Board investigation into the employer’s use of the severance agreement.  The Board also felt the clause would prohibit employees from discussing the agreement with their coworkers or a union, and thereby supporting them with regard to workplace issues.

The Board’s concern about a chilling effect arose from the phrasing of the clauses themselves.  The Board therefore held that even if an employer never had or would enforce the clause in a manner that interfered with an employee’s Section 7 rights, the broad words themselves were sufficient to violate the NLRA.

NLRB General Counsel Guidance Expands Restrictions

A month after the McLaren decision, Board General Counsel Jennifer Abruzzo issued interpretive guidance, in which she stated, among other key points:

  • the Board’s decision would apply retroactively;
  • most likely, only the unlawful clauses in an agreement would be invalidated, and not the agreement in its entirety;
  • the Board’s reasoning applies equally to other types of agreements with employees, such as offer letters;
  • narrowly-tailored confidentiality clauses that restrict the dissemination of proprietary or trade secret information for a period of time may be lawful;
  • narrowly-tailored non-disparagement clauses that preclude maliciously untrue statements that meet the legal definition of “defamation” may be lawful;
  • disclaimers or a “savings clause” may be helpful but will not necessarily cure overly broad provisions, and are recommended to enumerate nine specific ways in which employees can exercise their Section 7 rights; and
  • a range of other clauses, including noncompetition and nonsolicitation clauses, no poaching clauses, broad releases and covenants not to sue that go beyond employment claims, and cooperation clauses also may be suspect, depending on how they impact employees’ ability to exercise their Section 7 rights.

These new developments are immensely broad in their potential application as they invalidate clauses that are so commonly used as almost to be boilerplate language. Also, while the NLRA protects activity by individual contributors, and not supervisors, it is not always clear who qualifies as a supervisory employee, particularly in a nonunion environment.  The General Counsel further cautioned that even supervisors are protected from retaliation for NLRA-protected actions. The NLRA additionally is not limited to unionized workplaces but rather covers every non-supervisory employee throughout the country.  Finally, the retroactive application of the McLaren decision means that previously-signed agreements with employees are also at risk of being invalidated.

Employers Can Still Protect Their Core Business Information

So where does that leave employers? As a starting point, the new NLRB restrictions and the series of #MeToo-inspired restrictions have one common thread, in that they all recognize employers have a valid interest in protecting their trade secrets and proprietary information. A starting point, therefore, is for employers to reframe their agreements to separately and concisely protect only those legally recognized interests.

To the extent employers additionally want to ensure that employees will not say bad things about them, or recount information about bad things occurring at the organization, they need to get legal advice. As discussed in our prior articles, employers may be restricted from imposing confidentiality requirements as to certain behaviors, or at certain stages of the employment relationship. These restrictions may be outright prohibitions, or they may take the form of requiring disclaimers, consideration periods or additional waiver language.

Critically, since some of these changes are on a federal level, every agreement between an employer and an employee potentially is impacted.  One issue to be discussed with legal counsel is whether, and to what extent, the employer wants to include in its agreements a disclaimer as to the types of employee activities that are not subject to a confidentiality or nondisparagement clause.  At some point, the exceptions begin to swallow the rule and call into question the efficacy of having broad confidentiality or nondisparagement language.

Revisit Agreements with Legal Advice

The NLRB’s recent pronouncements are not the death knell for confidentiality and non-disparagement agreements. They do, however, necessitate revisiting those agreements, even if they were last reviewed as recently as February 2023, and identifying the information that an employer considers most critical to preserve as confidential, and the information as to which employers may need to tolerate some vulnerability of disclosure. Employers that take no action at this time and keep their current agreements in place run the risk that their confidentiality and non-disparagement clauses will be invalidated in their entirety, leaving the employer with no protection of even its core business interests.

By Tracey I. Levy

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14

February, 2023

Workplace Breastfeeding Laws Offer General Consistency with Local Nuance

Breastfeeding protections have gone mainstream.  Through the magic of a budget spending bill, nursing employees in workplaces throughout the country now have legal protections that will afford them break time and access to spaces outside of toilet stalls in which to express breastmilk.  That is a sea change in many parts of the country, and a more modest shift for employers in the tri-state area of New York, New Jersey and Connecticut, where these protections have been afforded to varying degrees under state and local laws going back nearly a decade.

Amazingly, the new laws are fairly consistent with those already in existence, which makes compliance less burdensome for employers.  The laws focus on requiring three things:

  • suitable space;
  • sufficient time; and
  • protected access.

Suitable Space

Make it Private

Nursing a baby often can be done discretely even in public, under cover of a light blanket, shawl or loose garment.  Expressing breast milk to be stored in bottles for later use is an entirely different operation and experience, as anyone who has seen or used the various pumping apparatuses well knows.  For that reason, the existing and new laws entitling employees to suitable space for expressing breast milk all prioritize that the space offer “privacy.”  Often the laws clarify that means the space should be “shielded from view” and “free from intrusion.”   And to dispense with the most obviously private but apparently not suitably hygienic option, the laws consistently state that the space cannot be a restroom or toilet stall.

Employers looking to achieve compliance should consider options like a private office or conference room with solid walls, blinds, or filtered glass – and a lock on the door or at least signage advising against entry while the room is in use.  Even a storage closet, if appropriately cleared out, may be fit for this purpose.

Consider Proximity

While the federal law only mandates privacy, the state and local laws often also consider accessibility.  New York, New Jersey, Connecticut and New York City, for example, all require that the designated space be in close proximity to the employee’s work area.  This criterion serves employers’ interests, as well, in that it minimizes the time that the employee needs to spend away from the work area.

Furnish Appropriately

Some of the laws additionally require that the designated space be outfitted appropriately to its purpose.  New York State and New York City require that the space be well lit and include a chair and working surface.  New York City and Connecticut require access to an electrical outlet, and New York City further requires that employees have nearby access to refrigeration.  New York State recognizes greater variability in work locations and therefore requires access to an outlet only if the workplace is supplied with electricity, and access to refrigeration if it is available.  Connecticut also requires nearby refrigeration or an employee-provided cold storage unit.   The New York state and city versions finally require access to clean running water.

Optimally, therefore, employers looking to achieve compliance should be looking to provide the following furnishings and equipment:

  • a chair and work surface;
  • ample light;
  • an electrical outlet; and
  • nearby running water and refrigeration.

Employers that incorporate those items will meet their obligations under the current jurisdictional variations in the law.

Undue Hardship Is Considered

Employers with fewer than 50 employees are exempt from the federal PUMP Act if they can demonstrate that compliance would impose an undue hardship.  Comparable state and local laws similarly recognize an undue hardship exception, but employers invoking this exception should be prepared to demonstrate that they reasonably explored options for providing suitable space and were unable to do so.

Sufficient Time

Access to a suitable location would be virtually meaningless if employees could only use it on their meal break.  The laws therefore additionally require employers to provide “reasonable” break time for employees to express breastmilk.  The federal “PUMP Act” grants this right to break time for up to one year after the child’s birth.  The New York State version extends the protection to up to three years after childbirth, while other state laws are not specific as to duration.

New York State has issued guidance that employees are entitled to break times of at least 20 minutes in duration in these circumstances, but can use more or less time as needed.  The U.S. Department of Labor previously had advised that a break of 15 to 20 minutes to pump, plus some time for set up and clean-up, was most common.  The DOL has removed any specific reference to duration in its most current Fact Sheet on break time for nursing employees.  Employers generally are not required to pay employees for break time taken to express breast milk, provided the time is actually a break and the employee is not performing work while pumping.

Reasonableness is a Variable Threshold

“Reasonableness” is determined through the same process that employers are expected to follow for accommodating employees for other legally-protected reasons.  In New York City, the process is called a “cooperative dialogue,” and the city’s phrasing is indicative of that which is expected of all employers in this context – some degree of discussion, consultation and consideration of the employee’s needs in relation to the nature, size and operations of the employer’s business.

The duration of break time needed for expressing breast milk may include factors beyond the employer’s control, such as the speed of the pump itself, as well as factors that the employer can influence.  For example, employers that offer a secure location for employees to store their breast pump in close proximity to the employee’s work space and/or the designated break room can thereby reduce the time needed for set-up and cleanup.

One of my clients was frustrated that an employee was taking hour-long breaks to express breast milk.  In speaking with the employee, the employer learned that each break period, the employee would leave the work area, go out to her car in the parking garage to retrieve her breast pump and walk to the designated room (waiting for elevators along the way), and then return her pump to her car before coming back to the work area.  A secure storage solution was all that was needed to cut the break time in half.  The more comfortable an environment the employer can provide, and the fewer obstacles an employee faces in cleaning and storing needed equipment for pumping, the less time an employee will need to be away from productive work.

Protected Access

All the laws related to nursing employees include an assurance that the break time and designated spaces are legally-protected.  This means that employers cannot discriminate or retaliate against employees for requesting or using the time or facilities, or for breastfeeding in the workplace.  Some of the laws, including New York State, New York City and Connecticut, additionally require that employees receive notice of their rights with regard to expressing breastmilk.  In New York, the state and city laws additionally require employers to have written policies with specifically-delineated provisions.

Compliance with these varied laws is more readily achievable than, for example, many of the paid leave laws.  Employers must still, however, note the variations in legal requirements and adjust their workplace practices accordingly.

By Tracey I. Levy

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26

January, 2023

Reconsider Job Requirements to Diversify Your Talent Pool

Following established techniques and methodologies can achieve efficiencies, assure consistency and produce positive outcomes.  But sometimes we need to challenge our historic approach, analyze the rationale behind certain standards and methodologies, determine whether those rationales are still viable, and make changes as appropriate.  Organizations facing a talent shortage and those looking to diversify the workplace may now be at such an inflection point.

Diversity Starts with Hiring Decisions

Hiring processes and decisions are the cornerstone of any initiative to diversify a workforce.  President Lyndon Johnson recognized this nearly 60 years ago when he issued Executive Order 11246, which continues to prohibit federal government contractors from discriminating in employment decisions based on certain protected characteristics and requires them to take affirmative action in their hiring and promotion decisions, to ensure the provision of equal employment opportunities.  Hiring also has been the focus of more recent government initiatives to achieve equal employment opportunity, as exemplified by the launch one year ago of a “Hiring Initiative to Reimagine Equity (HIRE)” by the Equal Employment Opportunity Commission (EEOC) in partnership with the Office of Federal Contract Compliance Programs (OFCCP) as part of its Equity Action Plan to advance racial equity and support for underserved communities.  If you do not bring a diverse group in the door, then there can be no diversity in any other aspect of the organization’s workforce.

Conventional Wisdom and Hiring Criteria

Educational background, training certifications and past employment history have long been our primary selection criteria when reviewing job candidates.  We often use these factors as a proxy for competence or even of superior ability, presuming that:

  • college-level education equates to higher intellect than those with a high school diploma;
  • a degree from a selective college or university indicates an even higher level of intelligence and accomplishment;
  • courses of study and advanced degrees from universities reflect specialized knowledge, intellectual rigor and commitment;
  • training certificates prove interest in a particular specialty;
  • gaps in employment are red flags of poor past work performance or personal issues that encroach on commitment to the work; and
  • prior industry experience offers better training than work in other fields.

Each of these are stereotypes – categorical assumptions, based on preconceived notions.  Stereotyping is a technique that we use to filter and organize the universe of data we may encounter.  In the abstract stereotyping is neither good nor bad, but there are exceptions to every stereotype, and some may be flat out wrong or predicated on inappropriate, discriminatory assumptions.  Relying too heavily on stereotypes in our hiring criteria and processes can lead us to overlook desirable candidates.

Ask “What If”

Sometimes particular degrees, training or experience is critical to performing a particular job.  Mere interest in law or medicine, for example, or having taken some courses in those subjects, will not qualify an individual to receive certification from professional licensing boards that are necessary to practice in those fields.

Often, though, there is opportunity to explore other considerations.

  • What if a candidate for a sales position did not attend or complete college because that candidate needed to transition more immediately into the workplace to help support the candidate’s family? If the candidate has proven work history, should the lack of a degree be an exclusionary factor?  And even if the candidate does not have proven work history, if it is an entry-level job why is a college degree required?  Is there any other way in which the candidate can demonstrate ability and potential?
  • What if a candidate’s family is legacy at a prestigious academic institution and the candidate was accepted largely on the coattails of past relatives’ achievements? Is that candidate more qualified than someone who bootstrapped their way through a state university and graduated in the middle or upper range of the class?
  • What if a candidate had to step out of the workforce due to a serious health condition that a prior employer could not or would not accommodate, and which has now been fully resolved? Does a prior health issue mean the candidate can never be a productive, hardworking contributor to the workplace?
  • What if the candidate chose to leave the workplace for a period of time due to caregiving responsibilities? Are there any skills or values that, while perhaps uncompensated, the candidate might have gained during that period that would be relevant to the position for which the candidate has applied?
  • What if a candidate was fired along with most of the division in a major restructuring, and the termination coincided with a serious economic downturn? Or a former employer relocated its operations across the country and the candidate had family obligations that precluded moving with the former employer?  Are either of those circumstances a negative reflection on the candidate’s skills and experience?

Many hiring managers might reconsider their preconceived assumptions in those circumstances, but if screening criteria are set too rigidly they can filter out candidates at the application stage, before they would ever have the opportunity to meet with a hiring manager.

Diversity Implications of Rigid Screening Criteria

Testimony provided at the EEOC’s HIRE roundtables reflect the implications for a diverse workforce when baseline hiring criteria are too rigid.  Among those screened out of the workforce based on a period of unemployment, for example, are:

  • workers who were pregnant or had caregiving responsibilities at some point;
  • disproportionately people of color; and
  • older workers who may have been impacted by past layoffs.

Similarly, degree requirements or preferences based on academic institutions attended can disproportionately screen out people of color and certain socioeconomic groups.

Recognizing those outcomes, the EEOC and OFCCP are actively promoting skills-based hiring and encouraging employers to consider alternative credentials for job candidates.  Last year, the state of Maryland announced that it would eliminate a four-year college degree as a job requirement for thousands of state jobs, and consider workers skilled through alternative routes, including apprenticeships and certification programs.  In making the announcement, the state reported that nearly half of the workers in Maryland are skilled through these alternative measures.

Maintaining High Standards

Reconsidering historic job criteria means applying different measures of skills and credentials and recognizing certain benchmark indicators of high achievement are not necessarily a proxy for identifying superior talent.  It does not mean an employer has to lower its standards.

I graduated from a regional law school, and subsequently completed an advanced law degree at an ivy league school.  The institutions I attended trained me on the law from different perspectives, each of which I found to be incredibly valuable.  I was no greater a scholar after graduating with my ivy league LLM than I was five years earlier when I earned my law degree.  Yet even now, 23 years after earning that second degree and notwithstanding many years working in various capacities, people will call out the ivy league degree on my bio as the hallmark measure of my accomplishment.  I am grateful for any doors that degree helps open, but I spent enough years having to prove myself without the stellar credential to attest that talent comes in all forms and from a variety of places.  As talent pools dwindle, broadening the net to reconsider hiring criteria opens the door to more candidates and opens the potential to develop a more diverse workforce.

By Tracey I. Levy

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17

January, 2023

Workplace Investigations: What Is “Bullying”?

There is a slippery slope between what may be considered sub-optimal or bad management practices, “bullying,” and “harassment.”  When behaviors prompt an employee complaint, workplace investigators need to evaluate where a supervisor’s conduct falls on the spectrum.  That analysis largely turns on an assessment of the target and nature of the behaviors, centered on the organization’s workplace policies.

Distinguishing Bullying from Harassment

As a workplace trainer, I regularly advise that the only distinction between bullying and harassment is that harassment is based on a protected characteristic, while bullying is not.  Actions like physical contact, threatening or insulting comments or gestures, and exclusion or isolation may prompt complaints of bullying, and they are equally likely to result in complaints of harassment.  The behaviors are the same, but the target differs.

An investigator presented with those types of reported behaviors first needs to determine whether they actually occurred.  If it seems more likely than not that they did occur, then the issue becomes one of determining whether an individual has been singled out for that treatment based on a protected characteristic, or whether the respondent engaged in those behaviors based on personal dislike of the complainant or indiscriminately toward a range of individuals with differing characteristics.  In other words, is this individual a so-called “equal opportunity jerk?”  That determination is not as simple as it may seem.

Considering the Target

Non-sexual behaviors, such as yelling at an employee, throwing papers at her and reassigning her to a different work group may be considered sexual harassment if they are targeting an employee because she is a woman.  The investigator needs to consider why the behaviors occurred, whether others have experienced similar behaviors from the respondent, and whether those others possess the same or different characteristics from the complainant.

Even if an investigator finds that a supervisor yells and makes demeaning comments to individuals across the gender spectrum, however, that may not be determinative on the question of whether the conduct is harassment or bullying.  Recently, for example, I met with a complainant who conceded that a manager was harsh and very critical of both the men and women on the team but asserted that the level of hostility was more pronounced toward women, and that only the women were belittled in a public setting.  As an investigator, therefore, it was not only the perpetuation of hostile behaviors targeting individuals across the gender spectrum, but also the severity of those behaviors as directed at different groups, that I needed to consider.

Anti-Bullying Policy Language Can Obviate the Distinction

Organizations can avoid this level of hair-splitting by adopting broader policies related to appropriate workplace conduct.  Policies that require employees to treat each other with respect and dignity or to maintain a respectful work environment, as well as those that prohibit both harassment and bullying, capture these types of offensive behaviors regardless of who is being targeted or for what reason.  Under such policies, the investigator can just focus on the behaviors themselves and, if they are found to occur, the organization has grounds to take responsive disciplinary and remedial action.  Whether the behaviors also give rise to a legal claim of harassment then becomes a question for litigators to resolve, and only if the matter proceeds to litigation.

Narrowly-defined policies can place organizations in a defensive posture.  Organizations that identify and resolve issues in a manner that sufficiently satisfies the complainant may be able to avoid subsequent legal action.  Organizations that decline to act unless offensive behaviors are found to be based on a protected characteristic are more likely to have a dissatisfied complainant who will pursue legal remedies to address the behaviors.

Bullying or Bad Management?

Investigators may also need to analyze behaviors at the other end of the spectrum, to determine whether a supervisor has engaged in poor management, or whether the supervisor’s approach crosses the line into bullying behavior.  In this context, the starting point needs to be the organization’s policies, and how they define bullying behavior.  Some organizations have detailed policies that provide a definition of bullying with specific examples, and those provisions should guide an investigator’s determination as to whether behaviors violate the policy.

Many organizations have less explicit policies against bullying, or none at all.  The challenge in those situations is that not every harsh or critical communication by a manager qualifies as “bullying.”  The nature of the behavior, whether it is targeted, and the reason for the behavior are often critical to determining whether a supervisor has crossed the line between appropriate feedback or discipline for an employee’s violation of workplace conduct standards, and inappropriate behavior.

Receiving critical feedback usually does not make an employee feel good and may cause discomfort or upset.  Some managers also deliver that type of message more delicately than others.  In general, we consider critical feedback to be appropriate manager behavior and not bullying because it is motivated by legitimate business considerations.

At times, though, even if critical feedback is warranted, the manner in which it is delivered may be inappropriate.  The distinction is reflected in existing legal definitions of “abusive conduct,” which require a certain degree of malevolence or hostility before workplace behaviors will be considered to be bullying.  Tennessee, currently the only state that legally prohibits abusive conduct by private employers, defines it as “acts or omissions that would cause a reasonable person, based on the severity, nature, and frequency of the conduct, to believe that an employee was subject to an abusive work environment.”  California, which requires harassment prevention training to expressly address bullying prevention, defines abusive conduct as that engaged in “with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests.”  Both states provide examples that include:

  • repeated verbal abuse such as derogatory remarks, insults and epithets;
  • threatening, intimidating, or humiliating verbal or physical conduct; or
  • gratuitously undermining or sabotaging a person’s work performance.

While employers can always define bullying under their own policies more broadly than the state laws, when the policies lack a clear definition, these laws provide a helpful framework for investigators delineating between bullying and bad management.

Policies as Guideposts

As with the distinction between harassment and bullying, organizations that adopt broad policies related to workplace conduct can make clear to employees and supervisors – in advance – how the organization defines the boundaries of permissible workplace behavior.  Policies that address bullying with a definition and examples of the types of behaviors considered to be inappropriate provide helpful guideposts as to the organization’s expectations and the norms for appropriate conduct.  Those guideposts can also inform workplace investigators’ determinations of when behaviors have crossed the line between bad management and bullying.  Without guideposts, it’s a slippery slope.

By Tracey I. Levy

 

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9

January, 2023

Contractor Agreements Subject to Federal/State Law Prohibitions on Confidentiality and Nondisparagement

In yet another example of laws blurring the distinction between employees and independent contractors, organizations need to beware that the prohibitions on confidentiality and nondisparagement agreements embodied in the federal Speak Out Act and various state laws often are equally applicable to independent contractor agreements.  The motive behind these prohibitions is driven by the egregiousness of the workplace behaviors that have been disclosed in the past several years, and the loopholes in existing laws that enabled such behaviors and kept them from being reported.  There are, however, significant differences in the nature of the relationship between an employee and an independent contractor, which may lead organizations to incline toward retaining confidentiality clauses in agreements with their contractors to the maximum extent possible while complying with the new laws.

The Business Need for Confidentiality Assurances

Independent contractors, which may include consultants, gig workers, and others providing services to support an organization, typically have a more temporal connection to the organization by which they have been contracted than do employees.  They may be providing services to multiple organizations simultaneously or serially, including in the same industry and among competitors.  In order to effectuate the work for which they have been retained, independent contractors may also need access to, or otherwise be privy to, confidential, proprietary, or trade secret information pertaining to those organizations.

Organizations thus have significant, valid reasons to require independent contractors to execute agreements, as a condition of providing the contracted services, that impose confidentiality, nondisparagement and other restrictions.  Typically in the past, organizations have drafted those agreements broadly, to protect their competitive information.  Federal and state laws now require more precision, and failure to adhere to the laws’ strictures risks invalidating the entire confidentiality or nondisparagement clause, thereby leaving the organization exposed to the sharing of its competitive information with other organizations or the public.

Standard Contractor Templates May Violate Federal Law

The federal Speak Out Act requires organizations to ensure their confidentiality and nondisparagement clauses with independent contractors do not limit the contractors’ ability to disclose information related to a sexual assault or sexual harassment dispute.  Provisions that may run afoul of the law include those that:

  • broadly restrict disclosure of “all information that the organization makes available to the contractor;”
  • prohibit disclosure of “Confidential Information,” defined to include not just proprietary information and trade secrets, but also “information about employees and employee relations, training manuals and procedures, information about recruitment method and procedures, employment contracts, employee handbooks…” and similar employment documents and information;
  • define “Confidential Information” as information that that has been marked as “confidential” or “proprietary,” that has otherwise been identified as confidential or that, “due to its character and nature, a reasonable person under like circumstances would treat as confidential;” or
  • prohibit disclosure of “Personal Information,” defined to include information that identifies, relates to, describes, or could reasonably be linked with a particular individual.

None of these examples, taken from real contractor agreements, were written with an intent to keep secret incidents of sexual harassment or sexual assault that might occur in the workplace.  But each of them may, in fact, have that effect, which is why it would be prudent for organizations to review their contractor agreement templates and revise them to conform to the new federal law.

State Laws Also Impose Limits on Contractor Agreements

As discussed in the second article in this series, various states have adopted their own restrictions on confidentiality and nondisparagement clauses.  In some jurisdictions those restrictions apply equally to agreements with independent contractors.  Organizations should note, for example:

  • New York’s restrictions on any agreement to resolve a discrimination claim that would prevent the person who complained from disclosing the underlying facts and circumstances of the harassment, which extends to protect anyone with a viable discrimination claim (including independent contractors);
  • Illinois’s restrictions on all agreements that preclude “truthful statements” regarding alleged unlawful harassment, discrimination or retaliation, which apply to both employees and non-employees (contractors and consultants); and
  • Washington state’s restrictions on provisions that limit employees (defined to include independent contractors) from disclosing conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under state or federal law to be a violation of EEO laws, a wage and hour violation, sexual assault, or otherwise against a clear mandate of public policy.

More of these laws are being passed each year, and states that were early adopters have been looking to other locations and amending their laws accordingly to impose greater restrictions on organizations.  Organizations that wish to protect their confidential and competitive information may need to revisit their existing agreements and consult with legal counsel to ensure they are legally enforceable and their business interests are protected as much as possible.

By Tracey I. Levy

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