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The Federal Gov't Disapproves of Your Confidentiality Provisions

By Casey C. Sullivan, Esq. on April 08, 2016 | Last updated on March 21, 2019

Do your protective orders, settlement agreements, and confidentiality provisions constrain information that might otherwise be reported to the government? Well, the feds would like you to knock it off.

In March, the National Highway Traffic Safety Administration became the newest federal agency to bar gag provisions and confidentiality requirements that might prohibit information gained in litigation from being shared with the federal government. NHTSA now joins the SEC and OSHA in barring gag clauses and anti-whistleblowing provisions.

Your Litigation Information Is Our Important Resource

NHTSA's new Enforcement Guidance Bulletin makes the reasons behind the rule clear: "safety information developed or discovered in private litigation is an important resource for NHTSA." Yet, gag orders and confidentiality provisions in settlements and protective orders can impede the sharing of that information with the agency.

An investigation by the Washington Post in 2014 found that "fear of retaliation for reporting fraud in the workplace is on the rise," in part because of the proliferation of overly restrictive nondisclosure agreements -- whether as part of litigation or just regular business practice.

Thus, NHTSA writes:

To the extent protective orders, settlement agreements, or other confidentiality provisions prohibit information obtained in private litigation from being transmitted to NHTSA, such limitations are contrary to Rule 26 of the Federal Rules of Civil Procedure, its state corollaries, and sound principles of public policy.

Although such restrictions are generally prohibited by applicable rules and law, the Agency recommends that litigants include a specific provision in any protective order or settlement agreement that provides for disclosure of relevant motor vehicle safety information to NHTSA, regardless of any other restrictions on the disclosure or dissemination of such information.

NHTSA's Not the First and It Won't Be the Last

NHTSA is just the latest agency to adopt an anti-gag order position. Last April, the SEC came out against confidentiality agreements that could impede employees from reporting securities violations to the agency. Such agreements are now considered "pretaliation" and are in violation of the SEC's Dodd-Frank rules.

Earlier this year, OSHA revised its "Whistleblower Investigations Manual" to take an anti-gag order stance, the National Law Review reports. The manual now states that "OSHA will not approve a 'gag' provision that restricts the complainant's ability to participate in investigations or testify in proceedings relating to matters that arose during his or her employment."

Such anti-gag policies are bound to expand in the future, as the federal government seeks to encourage whistleblowing and information sharing. That doesn't mean that you need to abandon confidentiality agreements and gag orders altogether, of course. But it does mean that those orders are likely to have a lot more exceptions in the future.

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