Working for Justice

Confidentiality Provisions: What You Need to Know and the Unique Strategy of the Trump Campaign

Posted October 15th, 2020 by in Civil Litigation.

The New York Times recently reported that the Trump campaign has proposed that former aide and Apprentice contestant Omarosa Manigault Newman pay for an ad campaign costing over $846,000 to remedy allegedly damaging comments Newman made about the president in a recent memoir. The campaign’s suggestion came as a proposed remedy for Newman’s alleged violation of a confidentiality agreement that she signed. Confidentiality provisions are increasingly common in employment and severance agreements—even if the remedy proposed by the Trump campaign is not.

What is a confidentiality agreement?

A confidentiality agreement is a contract by which the parties agree not to reveal certain information to others. A broad confidentiality agreement might say something like ‘employee agrees that she will keep confidential any information she obtains in the course of her employment.’ Of course, such a broad confidentiality provision presents problems of enforcement: Suppose one’s employment involves doing research on publicly available internet sites.

Usually, even if the provision is written broadly, the employer is interested in protecting more specific, non-public information: trade secrets, discriminatory or otherwise negative experiences the employee had with other employees, or other non-public information that the employer believes may be damaging to its business. Employees should consider trying to revise confidentiality provisions to reflect narrower, legitimate interests.

What happens if you breach a confidentiality agreement?

Usually, nothing. Most violations of non-disclosure agreements are minor and not worth the employer’s time and money to pursue. Indeed, pursuing minor violations of a confidentiality agreement often poses more risk for an employer than letting them go—not to mention the cost in time and money of doing so.

In those cases where an employer does pursue an employee for breach of confidentiality, the employer typically has to plead and prove the violation in court or in arbitration. In the absence of an agreement to arbitrate, the employer would have to file a complaint in court. The requirements vary based on the jurisdiction, but, generally, to file a court case, the party allegedly wronged (here, the employer), has to set out the alleged wrong (such as violation of a confidentiality agreement). This usually means drawing more attention to the alleged breach of confidentiality—not something the employer wants to do if it is trying to keep sensitive information under wraps. The employer also risks losing the case—and possibly having the confidentiality agreement invalidated. If the employer has used similar confidentiality agreements for many employees, this risk could be substantially magnified.

The situation looks markedly better for the employer in arbitration: Arbitration is confidential, before a hired third-party, and there is no public right of access. For reasons well set out in a thoughtful series of articles by The New York Times the deck is typically stacked for the employer in arbitration. And if the employer loses in arbitration, odds are that a subsequent employee challenging the same confidentiality agreement will never know that the confidentiality agreement has been invalidated.

What is the penalty for violating a confidentiality agreement?

Because confidentiality agreements are contracts, the rule of damages is the same as with any other contract: The party seeking to enforce the contract (here the employer) must plead and prove damages. In many circumstances, this can be challenging. Suppose you tell your friend about your bad experience with your boss. How does one put a dollar value on that? And claims for breach of contract do not permit punitive damages (damages designed to punish a bad actor for malfeasance).

In response to this conundrum, many severance agreements include liquidated damages provisions. A liquidated damages provision is an agreement by the parties that if one of the parties breaches, the party in breach will pay a specific amount of money. To be enforceable, these provisions must specify a reasonable sum and cannot be so large as to amount to a penalty (although, in reality, they often appear that way). Sometimes, in context of a severance agreement, the liquidated damages provision will state that the plaintiff agrees to return all or a portion of the money paid under the agreement. Don’t be fooled; this is still a liquidated damages provision. 

What is the Trump campaign doing?

It appears that the Trump campaign believes that Ms. Newman violated a confidentiality agreement and sued her in arbitration. It also appears that the campaign did not have a liquidated damages provision, and so instead hired a “crisis management expert” to put a dollar amount on a remediation campaign designed to reach voters in swing states—$846,000. It further seems that someone provided the report to the Times even though the report is likely subject to confidentiality provisions that typically protect arbitration proceedings from public view—probably with the hope that revealing the absurdity of the President’s position might forestall the campaign from continuing to pursue such damages.

Employment lawyers can advise on confidentiality agreements, which often depend on the law of the state in which they are to be enforced (New York may not, for example, be different from California law). Those concerned about a confidentiality agreements they signed should contact civil litigation attorneys who can advise on their specific situation.

Russell Kornblith is the New York Managing Partner who works on both qui tam / whistleblower cases and on discrimination cases.
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