Elizabeth Warren attacked fellow presidential candidate Michael Bloomberg during one Democratic debate. The premise was Bloomberg’s use of non-disclosure agreements (NDAs) at his company, particularly concerning claims of harassment and gender discrimination by three women. While NDAs have many applications, critics cite these “gag orders” as a tool for the culture of silence that enables managers, superiors and colleagues to act inappropriately towards co-workers. This has lead to making NDAs part of the rallying cry for the #MeToo movement.
Bad for politics, but good business
Bloomberg subsequently said his company would release three women from their NDAs, but Warren’s attack contributed to his exit as a candidate. Using NDAs to settle harassment charges and other misbehavior denigrates or misrepresents these agreements, and some states have even outlawed them, but businesses have many valid reasons to use them.
NDAs are usually straightforward business contracts between consenting parties to safeguard sensitive business information. Employees, contractors and business partners will learn vital information regarding products, business practices and trade secrets that give the company a competitive advantage in the marketplace. The objective is to protect this information. If there is a breach of this contract, the company can take action to protect its information. Examples of this include intellectual property, business plans, patents, or trade secrets.
There must be no coercion
The parties must willingly sign the contract for it to be valid. Companies will often offer sizeable payouts to sign the agreements, but the employee should consult with an attorney if they have concerns or questions about the contract. This enables them to understand the expectations, penalties and risks involved.
Businesses are also advised to consult with lawyers to draft a non-disclosure agreement that is equitable but binding in protecting the interests of the company. Those NDAs that do not follow the letter of the law or overly broad in scope often are dismissed by judges.