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Serrins & Associates LLC Employment Law Blog

Monday, January 29, 2018

So Your Employer is Asking for a Non-Disclosure Clause

Non-disclosure and confidentiality clauses in agreements are currently enjoying a moment in the media spotlight. At Serrins & Associates, we represent employees and former employees negotiating severance and employment contracts, and these types of clauses are often at issue in such negotiations. The clauses are also being talked about in relation to sexual harassment on the job, something our attorneys know quite a bit about. Let’s take a look at just how viable these clauses are from a legal perspective, and the context in which they are being discussed in the media today.

First, several former employees of President Donald Trump are said to have entered into these types of agreements, including former campaign staffer and political strategist Sam Nunberg, and former adviser Steve Bannon. (Outside of the employment context, some former alleged paramours of Trump are also suspected to have entered into such agreements in return for cash payouts.) The Nunberg and Bannon agreements have been raised in the context of possible contractual breach by both men. Nunberg was sued by Trump for ten million dollars for allegedly breaching his contract by speaking to reporters about Trump - the lawsuit later settled for an undisclosed amount. Trump’s attorneys are now threatening to sue Bannon for breach of his own confidentiality clause, due to Bannon’s participation in the tell-all political book Fire and Fury.

Separately, non-disclosure clauses and agreements are being raised in the context of the #MeToo movement sweeping the country. As more women come forward with tales of sexual abuse and harassment, other women are effectively silenced due to having signed a non-disclosure agreement in the course of their employment. Indeed, such agreements appear to have helped foster the culture of silence around Harvey Weinstein, as he is alleged to have pressured, harassed, and bought the silence of so many of his former employees using a contractual promise to keep quiet.

Here are the questions for employment lawyers: Are these clauses and agreements allowed? If so, just how broad can they be and still be enforceable? In the context of representing employees leaving their jobs, tactical questions also come into play: Can I demand a bigger payout or severance if my employer wants to include a non-disclosure clause?

So first up: Are non-disclosure agreements legal in New York? Yes, they are. Such agreements are not necessarily sinister: employers want to protect trade secrets and business practices from being disbursed to their competitors, and they also have a legitimate interest in former employees not bad-mouthing them for dubious or highly subjective reasons. The majority of non-disclosure agreements are not for sexual harassment cover-up purposes.

As to the scope of such agreements, the law does place some limitations on employment-related confidentiality agreements (which are usually bundled with non-compete clauses - the two work in conjunction to prevent disclosure of trade secrets and to prevent an employee from providing those secrets to a competitor in a new job). The clause in question must be “reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.” See, e.g., Ashland Mgmt. Inc. v. Altair Investments NA, LLC, 59 A.D.3d 97, 102, 869 N.Y.S.2d 465, 470 (2008), aff'd as modified, 14 N.Y.3d 774, 925 N.E.2d 581 (2010).

What does this mean in practice? Well, generally, it means a company can keep an employee from disclosing trade secrets or proprietary information for the duration of their career. On the flip side, a contract that flat out bars an employee from working with any competitors or clients of the employer might be considered overbroad and struck down. Severance contracts can also contain non-disparagement clauses unrelated to trade secrets, and importantly, these can be just as important to the employee as the employer: oftentimes, mutual non-disparagement provisions ensure the former employee will not receive a bad reference in the future.

This brings us to the question of tactics and legal representation. An employer can place a tremendous amount of pressure on an employee. After all, the employee is usually on the way out when these contracts are being negotiated - they are either unemployed and dependent on severance, or entering a new and uncertain professional future. Employers know this, and will use these circumstances to their advantage. Strong representation, whether it be in negotiating directly with an employer or providing advice and guidance in the background, is vital to securing a fair deal, and to creating a contract that will not unfairly bind your future prospects.

And what about sexual harassment and non-disclosure agreements? As of right now, nothing in New York law bars employers and employees from contracting to keep a claim of harassment quiet. That said, lawmakers are trying to change this, in light of the Weinstein case.

Are you currently negotiating a severance package and agreement, or do you anticipate doing so? Do you want to disclose a past instance of sexual abuse or harassment, and are unsure whether you are contractually able to do so? Give us a call. The experienced employment lawyers of Serrins & Associates are here to provide you with the legal guidance you need to move forward.





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