Company Gag Orders May Be Legal, But How Ethical Are They?

Nondisclosure agreements are becoming increasingly common, with many employers now requiring all workers to sign them, not just top executives. And that is beginning to make a lot of people uneasy, myself included.

Employers obviously have a right to protect company secrets that might help the competition, but most nondisclosure pacts today go much further, aiming to guard against any bad-mouthing of a company or its executives after an employee leaves the firm. Companies cite a growing problem with disparaging comments because social media have made it so much easier to reach a large audience with harmful complaints that may or may not be true. Some firms make prospective workers sign gag agreements before they are hired, while others wait until an employee is terminated and make the agreement a requirement to receive severance benefits – or a good recommendation.

My own experiences have run the gamut. While still working for a government agency, I spoke out against what I felt was wrongdoing that violated the law. It ended up costing me my job in the midst of the 1982 recession. In another instance I signed a pre-hiring nondisclosure agreement and bit my tongue after I left when my bosses got into trouble and made statements that I knew I could prove were false. And then I signed one as a condition of a more genererous severance package. That one didn’t really bother me because there was nothing I needed to say publicly.

But an powerful column by Will Blythe in The New York Times is forcing me to think hard about the whole idea of nondisclosure pacts. When Blythe was terminated from a job at Byliner and told it was strictly for budgetary reasons and not because of performance, he was asked to sign an agreement promising not to say anything disparaging about the company or his bosses. If he didn’t sign, he’d lose his two weeks’ severance pay. Blythe wrote quite eloquently that while he had no intention of disparaging his employer, he wasn’t about to give up his right to free speech.

One could argue that in fact, Blythe’s column amounted to disparagement of Byliner and that by asking him to sign the agreement, the company got the opposite of what it hoped to achieve. But Blythe was really taking on the widespread practice of nondisclosure agreements rather than singling out his old company. One could also argue that journalists (of which I am one) take this more seriously because our profession’s entire reason d’être is based on free speech.

This all comes as Bloomberg L.P. (one of my former employers) wrestles with similar questions. Bloomberg News abruptly parted ways with Michael Forsythe, a respected prize-winning reporter, after he was suspected of leaking information to The New York Times, which would have violated signed agreements. The company may have had the legal right to terminate Forsythe (who was subsequently hired by the Times), but it seems rather hypocritical for a journalistic enterprise to fire someone for leaking information when so many of its published stories depend on employees of other organizations leaking information, sometimes in violation of the law. And it’s worth noting that the action has hardly stopped the leaks of inside information about Bloomberg’s internal deliberations.

While this may be a tougher problem for journalists, I think all companies need to think long and hard about whether such policies are justified. No one questions their need to protect secrets that would help the competition, but disparaging an HR policy or an abusive boss is another matter entirely. If a company feels its actions and those of its employees are defensible, then defend them publicly. Don’t shut off the debate preemptively. After all, you might learn something that will make your company better. As Blythe put it, “If a company isn’t strong enough to be reproached, then it simply isn’t strong enough, period.”

And it strikes me that in the current economic climate, when jobs are so scarce that employers hold a far more powerful hand than workers worried about paying the rent, companies need to think long and hard about how they use their power. That includes everything from paying a fair wage to forced overtime to putting up with tyrannical bosses. By all means, protect your legitimate interests and your genuine secrets. But never forget that abusing your power is, by definition, unethical.


5 thoughts on “Company Gag Orders May Be Legal, But How Ethical Are They?

  1. I’m not a lawyer, so this is not legal advise.

    (A) If you sign an agreement that prevents you from challenging a false statement by your boss, then the agreement becomes a collusion to commit fraud, and therefore would not be legally binding. (I read someplace that an agreement to commit a criminal act cannot be binding).

    (B) An agreement to protect company secrets may be reasonable, but why aren’t those secrets protected instead by copyright law?

    (C) News media, like you suggest, are a special case. They can’t copyright the news. And they have a right to be upset if they are ready to print a story and you leak it to a competitive paper. But what if they decide not to print the story?

    (D) All promises contain a degree of moral hazard. If there is significant moral harm in keeping the promise, then it may be morally right to break it.

    (E) A lie may be always unethical, but if you are required to provide an answer to someone who has no moral right to the truth, then a lie may be moral, as when the Nazi soldier asks whether Anne Frank is living in your attic.

    • I agree, Marvin, that once a company breaks the law, the rules change, but a company can be guilty of unethical, even shameful, behavior without breaking the law. What if an employer lies to the press? Do you have the right to set the record straight if you’ve signed a nondisclosure agreement? And what if a prospective employee asks you what it’s like to work at the company and you’ve agreed not to disparage the firm? These are much tougher calls.

      • Why would the employer lie to the press? If it’s a publicly traded company, and the lie is intended to obtain or keep investors, then it is fraud (again, I’m no lawyer). On the other hand, if she’s having an affair on the side, and it is nobody else’s business, then the lie to the press may be defensible. If the lie constitutes fraud, then you would be legally and ethically obligated to disclose it, regardless of any non-disclosure agreement. If the lie is about an affair, and the public has no right to know the truth, then ethics would prevent you from disclosing it regardless of the agreement.

        A non-disclosure agreement has an implied exception to prevent you from participating in fraud or other illegal activity.

        It might be a good idea, when asked to sign such an agreement to make the exception for hiding illegal acts explicit.

        Slightly different scenario: When we were working to implement a new system at the hospital where I worked, the managers had a policy that we should be like ducks, appear to the customer as if we were calmly moving on the water, even though our feet were pedaling like crazy under water to fix problems.

        It happened that when we were about to implement a piece I had been working on, there was a downtime procedure being developed by someone else, and it appeared it would not be ready before implementation. I was directed not to advise the hospital because someone else would. As the deadline approached, I followed up with the guy working on the missing piece, and it became apparent that only a small part was actually working. When I also discovered that the downtime procedure would be used on purpose the weekend we went live, I checked with everyone and no one had told the hospital manager who would be affected. Since I knew the manager and had worked with them for many years, I advised them of the problem. I caught a lot of static from my boss, but bosses come and go more often than hospitals.

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