One of the most salient topics in employment contracting right now, is the use and misuse of restrictions on what employees can say about their employment. There are two categories of terms I want to talk about which often get kind of mixed up conceptually and often run together for reasons that are going to become clear. So one is a nondisclosure term, which is basically a promise that an employee makes to keep confidential information that they learn or experiences that they have while they're working somewhere. The other is a non disparagement term, which is sort of a promise not to make public criticisms of the employer or the employment. There are three points where an employee might be asked to sign NDA or non disparagement clause. The first is as a condition of employment, so when you join a company you might be asked to sign as a part of your employment agreement on NDA. The second is that a condition of severance, so in exchange for a severance package for someone who's laid off, they might sign an NDA that says they won't reveal the terms of the severance. And the third is a condition of a settlement of a claim, so if an employee has brought a harassment complaint for example. And comes to an agreement with the company about compensation that might come with an NDA, non-disparagement clauses, nondisclosure agreements and also non competes. These are all forms of restrictive covenants and employment agreements and you'll see some themes emerge in how courts approach these terms. These are all species of employment contracts that basically try to restrict what employees can say about the experience with a job, it's come at different times. But now you can think about a spectrum of the kinds of things that might be restricted. So, let's take what may be the most standard and the least controversial use of a nondisclosure agreement, which is to protect proprietary business information. This could be inventions or it could be client lists or maybe you're hired for example to be in human resources and you agree to hold confidential the information that you learn about your fellow employees. Confidentiality about proprietary business practices in particular, are subject to a pretty robust body of law specific to trade secrets. Including the Uniform Trade Secrets Act was adopted by most states which gives a statutory cause of action for wrongly acquiring or misappropriating trade secrets. So a court trying to determine, whether a particular agreement to protect confidential business information, the court might ask something like this. Is the restriction prohibiting disclosure reasonably necessary to protect business interests? Is it unreasonably restrictive of the employee's rights? Is it prejudicial to the public interest? Some jurisdictions will specifically look and see whether that even like a trade secret NDA is limited in time and geography. And the failure to limit it could be a reason to hold it presumptively unenforceable. But agreements to protect trade secrets, especially if they're not coupled with non compete agreements. Get real difference in part because it's easy for employers to make a compelling argument, at the restriction is reasonably necessary to protect their business interests. But you want to keep this set of questions in mind, this sort of test in mind, because courts are going to play variations on a theme across restrictive covenants, right? So, the questions are is it necessary to protect the business interest? Is it restrictive of the employee's rights? And what about the public interest? So you can think about restrictive covenants as really pushing courts to have to think across legal questions. Because they can get into questions that can feel like contract ascent questions on the one hand or then state level employment law questions on the other. And then also issues they're kind, butting up against the First Amendment right, asking people not to speak on certain issues. So, let's consider a case from 2021 Denson versus Trump for president campaign. Jessica Denson was hired as a phone bank manager for the presidential campaign of Donald Trump in 2016, and signed an employment agreement that included two pertinent clauses. I'm not going to read the clauses in full because they're very long. But a sample of the core part is something like this, you promised not to disclose disseminate or published or caused to be disclosed, disseminated or published. Any confidential information and not to use any confidential information in any way detrimental to the company. Mr Trump any family member, any Trump company or any family member company, that would be a nondisclosure agreement. And then there's also a non disparagement term which read something like this. During the term of your service and at all times thereafter, you hereby promise and agree not to demean or disparage publicly the company, Mr Trump any Trump company, any family member or any family member company or any asset of the foregoing. So the judge asked about this set of clauses, is this provision reasonable and sufficiently definite? And the court used a test referred to as the Ashland Test, in that case called Ashland. Which said the court will enforce restrictive covenants to the extent that they are reasonable in time and area. Necessary to protect the employers legitimate interests, not harmful, the general public and not unreasonably burdensome to the employee. The court also followed up and said under New York contract law, New York where this was being litigated impenetrable vagueness and uncertainty will not do. So, when the court looked at this particular contract between the campaign and the employee, it was pretty skeptical. It said this provision, for example, for the nondisclosure agreement applies to a lot of people and a lot of companies, many of which aren't even named. Then the court said the topics that can't be disclosed are really broad, communications and strategies would sort of be anything related to the campaign. The campaign tried to clarify to the court when we said, strategies etc. What we meant are things like personnel resources or digital marketing information. And the court said yes, it is right that you might have a legitimate interest in those things, but you wrote a provision that was much broader than that. The court wrote it is difficult, if not impossible for Denson or another campaign employee to know whether any speech might be covered by one of the broad categories of restricted information. Whether that speech might relate to one of the several hundred potential subjects of the nondisclosure provisions or whether that speech may relate to a matter, President Trump will determine as confidential. Because the effect of these burdens is to chill the speech of Denson and other former campaign workers about matters of general interest. The nondisclosure provisions is harmful not only to them, but also to the general public. So we could see the court working through these same kinds of issues that courts will think about in the context of nondisclosure provisions across the board. And in fact, the court did the same thing with respect to the non disparagement clause. Concluding that there was actually no manifestation of mutual assent that was sufficiently definite, to assure that the parties were truly in agreement with respect to the scope of the non disparagement provision. The court said these provisions would really, this is now paraphrasing would need to be much more specific and narrowly tailored in order for us to decide that the parties had really come to a meeting of the minds. You can see here, courts are pretty restrictive about what kinds of restrictive covenants can be enforced. And the other thing to note is that some states are directly regulating certain kinds of NDAs. So California and Illinois, among others, have actually passed legislation directly aimed at non disclosure provisions that would prohibit employees from disclosing details about sexual harassment. Legislatures and courts are actively confronting these questions state by state, especially in the wake of the Me Too movement. Overall, we can see that both courts and legislatures have been quite attentive in the context of restrictive covenants. To trying to balance the interests, on the one hand, in sort of what is required to protect business interests. On the other hand, what's going to be burdensome for employees and what's ultimately going to be harmful to the public interest
