Non-disclosure agreements have appeared in news reports on political scandals and sexual misconduct. NDA agreements are also being used with more frequency in employment contracts and may pose problems for employees. A NDA, or confidentiality agreement, is a legally-binding contract that prohibits the signer from disclosing sensitive information. Substantial financial penalties, as high as $25,000 to $750,000, may be imposed for each breach of these contracts.
These agreements were first used to protect a company's financial interest in safeguarding confidential proprietary information, such as new technical innovations or intellectual property. Around 30 years ago, however, NDAs became more common in employment and settlement contracts. Employers used them to impose a secrecy atmosphere.
Approximately one-third of all employees signed these agreements in this country. Low and mid-level employees are being asked to sign confidentiality agreements even though they do not have access to confidential financial or proprietary information. Government use of a NDA at its workplaces may violate constitutional free speech guarantees.
An NDA cannot prevent an employee from reporting illegal behavior or cooperating with a criminal investigation. However, many employees are unaware of this and may be intimidated from reporting crimes. These agreements may discourage employees from disclosing questionable or illegal activities, such as discrimination or sexual harassment. However, these agreements are also used to negotiate resolutions to this behavior.
For example, a company may agree to provide a financial settlement to an employee who was a sexual harassment victim in return for the guarantee for their silence. But, these have proven to be emotionally devastating, in some cases, because victims were scared to share their complaints with their therapist because of the fear that they may need to return any financial settlement. Employees may be frightened to violate an NDA because they may be accused of misconduct which could trouble their career. Other workers have signed an NDA under duress to obtain severance pay when they were terminated.