Employees are perhaps most vulnerable at the doors of employment — as they’re trying to be hired‚ or as they’re being let go.
That’s also when employers may be asked for signatures on contracts that either guarantee employment, or severance, according to Beca Mark, the founder and CEO of at Megastar HR. Those contracts, the Sandy-based human resources professional said, might include a confidentiality clause or nondisclosure agreement (NDA).
At least a third of the U.S. workforce is bound by some form of NDA. Their purpose, Mark said, is to protect sensitive company information.
But they are “often overused,” said LynnAnn Erickson, a professor of human resources and employment law at Utah Valley University. Confidentiality clauses that are “unreasonable, or too general in their scope,” she said, can do more harm than good — for both the employer and the employee.
Employees who were laid off from doTERRA in May told The Salt Lake Tribune they’d signed confidentiality clauses as parts of their separation agreements — which, according to the National Labor Review Board, now violate federal labor laws. DoTERRA said in an email to the Tribune that, at the time, it had followed all relevant statutes.
The legal landscape surrounding NDAs has changed in recent years in both federal and state law, according to Lauren Scholnick, an employment attorney and adjunct professor at the University of Utah’s law school.
So, should employees sign an NDA if presented with one?
What’s protected under an NDA?
Nondisclosure agreements are meant to protect company information like trade secrets, intellectual property and business strategy, Erickson said. But when they’re too broad, they risk becoming unenforceable.
“They only make sense in specific situations,” Erickson said.
In February 2023, the National Labor Relations Board ruled that a non-disparagement clause offered to laid-off hospital employees in Michigan as part of their severance agreements was too broad in its scope and therefore unenforceable. The clause prohibited employees from making any statement “that could disparage or harm the image of [the employer,]” according to the NLRB.
But employees are legally entitled to talk about their workplace conditions, the NLRB ruled. It is a protected activity under the National Labor Relations Act (NLRA) — a federal law that protects employees’ right to collective bargaining and ensures workers can “seek better working conditions... without fear of retaliation.”
“As long as they’re not releasing proprietary information, anyone can say, ‘I hated my job and this is why,’” Beck said.
The NLRB’s 2023 ruling reestablished the precedent that separation or settlement agreements cannot legally include broad non-disparagement clauses as a condition of payment or benefits. The “mere proffer” of such an agreement “can chill an employee’s exercise of section 7 rights,” the NLRB ruled, and is therefore unlawful.
“The idea is that you don’t want to gag employees from talking about wages, hours and working conditions,” Scholnick said.
The 2023 NLRB rule applies to employees “whether they’re in a unionized workplace or not.”
But, Scholnick and Mark added, the rule only applies to “rank-and-file” employees — not managers or supervisors.
Employees can still be asked to keep trade secrets on behalf of the company, Scholnick said. But those are specific details that should be spelled out in the contract.
A cultural shift
The 2023 NLRB ruling marked a legal shift in what is allowed in employment contracts — until then, agreeing to silence in exchange for a payout was a perfectly legal negotiation, Scholnick said.
But it was also part of a broader cultural shift, said Erickson, the UVU professor. The #MeToo movement, she said, helped expose the ways in which NDAs can protect and even encourage predatory behavior in the workplace by buying silence.
Workplace harassment is considered a working condition, said Marks, the HR professional. Employees should, legally, be allowed to talk about it without consequences.
Utah lawmakers added redundancy in March with a bill that prohibits NDAs “related to sexual assault and sexual harassment, as a condition of employment.”
“The only way that sexual harassment and violence in the workplace happens is when we cannot talk about it and point it out to stop it,” Rep. Kera Birkeland, R-Morgan, told the House Judiciary Committee when she introduced HB55 in January.
While Utah’s law provides additional protection for employees who allege sexual harassment at work, said Scholnick, the employment attorney, it also extends that protection to people who aren’t rank-and-file employees, like supervisors and managers who are not protected under the NLRA.
Erickson said she thinks NDAs too often try to compensate for company policy or cultural deficits. Their legal intent — to protect privileged information — has been diluted by attempts to manage companies’ reputations.
“Many of these risks could and should be mitigated by implementing straightforward, proactive practices that prioritize trust, open communication and fair treatment,” she said. “Address issues with policy, not legal contracts.”
Hired or fired: to sign or not to sign?
There are two moments in which an employer might ask an employee to sign an NDA, Mark said: when the employee is hired, or when they’re being let go.
The NLRB rule applies to any post-employment settlement agreement, Scholnick said. But employees should also be wary of overly broad confidentiality clauses in job offers or employment contracts.
“Employers [will write] things into agreements like, ‘this is not a condition of employment,’ even though it might very well be,” Scholnick said. “If it’s clear you can’t talk about it, especially in a situation where you’re being hired and being asked to sign before there’s a controversy, that’s where it is inherently a condition of employment.”
Employers aren’t generally trying to break the law, Scholnick and Mark said. If an employee is asked to sign an NDA and question its legality, the easiest course of action is just to say so.
“All you have to do is say, ‘Hey, this isn’t allowed,’” said Mark, the human resources company CEO. “Any attorney is going to change it.”
“It takes a lot of fortitude and courage,” Scholnick added. “But not a lot of employers are trying to violate the rules. They just didn’t know. They’re doing it because they haven’t been challenged.”
A less confrontational option, Scholnick said, is to “sign it and not abide by it.” It’s also the messier choice.
“For me, it’s better to understand your rights and push back,” she said.
And if you must sign or offer an NDA, Erickson said, look for specificity. If it’s missing, ask for it.
“The more specific, the better,” she said.
Shannon Sollitt is a Report for America corps member covering business accountability and sustainability for The Salt Lake Tribune. Your donation to match our RFA grant helps keep her writing stories like this one; please consider making a tax-deductible gift of any amount today by clicking here.
