It is not often that employment law sees mass media headlines, but non-disclosure agreements or “NDAs” have seen quite a lot of coverage in the past few years. Harvey Weinstein is alleged to have used them to keep victims quiet after settlements, and President Donald Trump is now a defendant in a lawsuit seeking to invalidate an NDA with Stormy Daniels that is alleged to have amounted to a “hush agreement.” Even Major League Baseball has been in the mix (a few years back), with the New York Yankees reportedly considering “some type of confidentiality or non-disparagement clause in future contracts of managers and coaches.”
{What I have said about employment law is something like what I say about insurance law: It does not make the news; it makes the news boring. So, all the media attention is newsworthy in its own right.)
Non-disclosure agreements are generally enforceable in Connecticut. Often, they are part of a written settlement agreement, whether pre-suit or after the commencement of litigation. They are frequently used by employers in the context of employment-related settlements, i.e., to protect the employer’s reputation and good name from unsavory allegations by the settling employee. But NDAs arise in many other contexts, for example to protect an employer’s trade secrets and business models where an employee leaves the company.
Depending on the circumstances, non-disclosure agreements can serve a legitimate public interest by encouraging and incentivizing resolution of various types of disputes.
All of this said, the #MeToo and other news brought a lot of new scrutiny to non-disclosure agreements. For example, a settlement payment for a victim of sexual harassment or abuse makes sense, on some level, when it compensates a victim in a way that helps avoid litigation. It also makes sense, on some level, for the paying party to be allowed to move on and avoid public embarrassment where there is a dispute about the allegations.
The trouble and vulnerability for non-disclosure agreements arise when a settlement payment looks something like “hush money” that effectively conceals bad acts and, worse, indirectly allows the bad acts to continue.
Courts in Connecticut, New York and elsewhere are sometimes willing to void or reform non-disclosure or other agreements when they violate public policy. But this is a narrow means of attacking an NDA, and litigants and courts will be grappling with these issues for a long time as new issues arise. The more likely source of limitations on non-disclosures are prospective fixes through state legislatures.
Anyone considering entering into a non-disclosure agreement should of course carefully consider the risks and advantages of doing so. In the current environment, parties to prior non-disclosure agreements should be aware of ways to attack or potentially limit or invalidate those agreements.
The opinions expressed are solely those of the author(s). This content is provided as background and does not constitute legal advice.
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