Non-disclosure agreements are used by many companies with the purpose of guaranteeing or, at least, trying to hinder the disclosure of their confidential information by employees or former employees. Some companies require the signing of NDAs alongside the employment contract, while others require the signing of these documents upon termination of the employment contract, occasionally offering a bonus and demanding silence in exchange. If the employee violates the agreement, he or she may be forced to return the amount paid, often with interest and/or fines added.
However, two decisions made by the U.S. Securities & Exchange Comission (SEC) this week should influence the way NDAs are carried out for U.S. employees.
On September 19, 2023, it was announced that the SEC has reached a settlement of US$375 thousand dollars with CBRE, the largest real estate company in the world, due to confidential agreements with employees. CBRE is headquartered in Dallas, Texas, has approximately 115,000 employees, and works with clients in more than 100 countries.
As a matter of fact, the problem identified was the following: between 2011 and 2022, CBRE required its employees to sign a document certifying that they had not filed a federal complaint against the company. This was a condition for receiving separation pay. During this period, at least 884 employees signed such agreement.
Due to this content, which imposes a certain obligation of confidentiality, the SEC concluded that the requirement violated rule 21F-17, established by the Dodd-Frank Act, as it consisted of an action that prevented the individual from communicating directly with the SEC team about possible violations of current laws. Therefore, such violation constituted an illicit initiative to try to stop the actions of whistleblowers.
Additionally, in early September 2023, the SEC formally charged the company Monolith Resources for using agreements with employees in which they agreed to waive their rights for monetary compensation from reporting information that could trigger investigations by federal agencies. SEC and Monolith reached an agreement worth US$225 thousand dollars.
The SEC has made their attention to NDAs clear, regardless of whether they are signed at the beginning, during or at the end of the employment contract between the company and the employee, in order to prevent content that may inhibit the employee from reporting violations of laws to federal agencies.