The Limits Of Confidentiality Agreements

Guest

Lisa Banks, attorney and partner, Katz, Marshall and Banks

When the Herman Cain harassment story broke, the accusers' names and their stories were blocked by confidentiality agreements. But one of those women has gone public, which raises questions about the purpose of confidentiality agreements, and how well they work.

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NEAL CONAN, host: When the Herman Cain harassment story broke in Politico almost two weeks ago now, the accusers' names and their stories were blocked by confidentiality agreements. Both have accepted settlements in exchange for a promise not to talk. Now, one of those women has gone public, which raises questions about the purpose of confidentiality agreements and how well they work. If you signed one, call and tell us why. 800-989-8255. Email: talk@npr.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION.

Lisa Banks is an employment attorney and partner at Katz, Marshall & Banks and joins us from our office here in Washington. Good to have you with us.

LISA BANKS: Good to be here, Neal.

CONAN: And a news site reported the name of Karen Kraushaar, and she confirmed that and says she will disclose details. Now, we don't know exactly what's in her confidentiality agreement with the National Restaurant Association. But as a rule, don't those usually constrain both sides?

BANKS: Yes, they usually constrain both sides to some degree or another. Sometimes it's just the specific terms of the agreement or the payment. Sometimes it's the facts and allegations leading up to the agreement itself. So it can be very broad or it can be more narrowly tailored.

CONAN: There were 12 years ago. Are there time limits sometimes?

BANKS: Not usually. Usually, when you enter into a severance agreement or a settlement agreement when you leave an employer and there's a confidentiality agreement, it's forever.

CONAN: And who are they meant to protect? Both sides, I suspect.

BANKS: Yeah. Usually, they'll be mutual. So I have seen them one-sided. They're drafted by the employer, so those would be designed, obviously, to protect the employer. More often, and certainly if another lawyer is involved, they're going to be mutual, and that's designed to protect both sides. The employer wants to be protected in terms of any allegations that it doesn't want to come out or the amount of payment that it made. The person may want also to not have the circumstances of their departure made public because of future employment concerns.

CONAN: Are these analogous to, well, plea agreements where someone says, well, I'm not saying I was guilty, but we reached a settlement, nobody can talk about it?

BANKS: That's right. Usually, the - these kinds of settlement agreements, when there's a threatened legal claim will include what's called a non-admission clause, which is essentially the employer or even both parties saying neither party is admitting any liability whatsoever as to the allegations here. However, in order to avoid the expense and time of litigation, we're agreeing to come to a resolution.

CONAN: Now, Herman Cain, a presidential candidate, had said these allegations have no merit. They are defamatory, he said, many other things. He no longer works for the National Restaurant Association, but does - do his disclosures breach the confidentiality agreement?

BANKS: I would say yes, absolutely. I think that he's going to be a third party beneficiary to this agreement. He may be specifically included as a party to the agreement. We don't know until we see it. But in any event, by coming out and talking about or denying these allegations and impugning the women involved and also talking about what he believes the amount of the payments to be, I believe that he has breached the agreement himself.

CONAN: As we mentioned, there's a website that reported first the name of one of these women. She has since come out and said she may discuss details. If she does show, is she in breach of the confidentiality agreement?

BANKS: She may technically be in breach. But for any of breach of contract action, there has to be damages. And the problem here for the National Restaurant Association or Herman Cain is there are going to be no damages. He's already been out there talking about it. So I think the restaurant association is going to be hard pressed to show that there's any damage from any of these women coming out and talking about it at this point. And I think the chances of them trying to go after these women for breach of the agreement is very remote.

CONAN: All right. Stepping outside these cases, if someone, just out of the blue, violated their confidentiality agreement and said the details of whatever it was that was involved, what recourse does the company have?

BANKS: Well, the company - there are a couple of things. It's essentially a breach of contract. So the company can come after the person for a breach of contract. And again, they would have to show some sort of damages. And some of these agreements contain what is called the liquidated damages provision whereby the parties agree ahead of time what the damage might be. So if somebody is paid a year's salary walking out the door and they breach, there may be something in the agreement that says you have to pay back all of that money if you breach. We're agreeing ahead of time that that is our monetary damage. Otherwise, they would have to go forward, and they would have to prove that there actually were damages.

CONAN: We're talking with attorney Lisa Banks about confidentiality agreements. If you signed one, call and tell us why. 800-989-8255. Email: talk@npr.org. And Teri(ph) is on the line with us from Northwest, Ohio.

TERI: Hi.

CONAN: Hi.

BANKS: Hi.

TERI: I was calling because I had to sign a confidentiality agreement in order to receive funds that were owed at that day to a number of minority employees of a particular company that were not paid fair wages over a number of years. And a class action suit was filed and we won. But in order to get the money that we were owed, we had to sign a confidentiality agreement, which I really didn't think was fair.

BANKS: Well, normally, if you're going to sign an agreement, there has to be what's called consideration. So if you were entitled to the money anyway, there really wouldn't be consideration. So there may have been other things involved in the agreement that were of value to you that the company would argue was worth you giving them the confidentiality agreement.

CONAN: And if you didn't think it was fair, Teri, why did you sign it?

TERI: Well, because there was seven years of back wages that I actually needed. And so, in order to receive those wages as a settlement, we had to agree to a confidentiality. So, of course, I signed because there was really no other option if I wanted those dollars.

BANKS: And the company, probably, took the position during that time that you weren't owed that much but was paying it in settlement of these claims.

TERI: Well they, again, claimed no real responsibility. They denied it. They did not admit to the fact that they had done what the court actually proved that they did do. But the payment was simply to stop any further types of actions or I think for - from stopping anyone from getting even more money by going and sue them individually rather than as a class action.

BANKS: Right. And probably, the important part to the company was the release of claims. And oftentimes, these confidentiality agreements come within a larger legal agreement that includes a release of claims, the confidentiality agreement, non-disparagement, things of that nature.

CONAN: Lisa Banks, is there an implicit threat that, well, maybe if you want to take this all the way through court trials and appeals and all of that against our serried ranks of lawyers over there, maybe you'll get more. But it's going to cost you a bundle.

BANKS: Sure. And, you know, that goes both ways, however. There's always a risk for a company going forward because they have to pay a lot of money to defend a claim, and they're always at risk for a larger judgment down the road. So there's risk on both sides. And one of the reasons or the primary that people will settle early is to avoid that risk and to come to an agreement where everybody takes a little less or pays a little bit more than they wanted to.

CONAN: And it goes away. Teri, thanks very much for the call.

TERI: Thank you.

CONAN: And you're listening to TALK OF THE NATION from NPR News.

And let's go to Chris(ph), Chris with us from Modesto.

CHRIS: Hi. Yeah. When I was an undergraduate student at Georgia State University in the mid-'90s, I got a job as a research assistant, working for a PhD student. She was in research on eating disorders in college girls and their - it was a pretty in-depth measure. I was the only person who applied for the job, and I think she was kind of hoping for a female. But there were tons of confidentiality agreements involved because it was a very extensive inquiry. And there was also the fact that I may run into these people on campus. And so it was interesting. I scored about 350 measures over the course of a year for the PhD student.

But I was surprised at how in-depth the confidentiality agreement went in, asked some questions about their experiences of eating disorders. And this was before HIPAA. So I think they were trying to cover as many legal things that the university will want to since it was asking about medical conditions and such.

CONAN: But weren't those individuals identified just by initials or number code or something so you wouldn't know who they were?

CHRIS: The concern was with that, and we kind of set up a novel way of handing out the measures, was that if a student signed up for it and then maybe they were in a class with me and they saw me, the fact that they knew that I might be measuring these later on, even though it's an anonymous number, might affect their results.

CONAN: I see. I see. All right.

CHRIS: So I basically sat in a room and through like a little - like a window thing, they would just come up and I would give them the measurements. So they didn't really know who I was except somebody behind a, you know, a shaded, painted of glass. And they would drop them off in a drop box in the room, all confidential, but it was interesting. Before HIPAA, there were lots of things about the medical information and how I couldn't just discuss it, you know, in any context except with my research with the PhD student.

CONAN: All right.

CHRIS: Great topic today. Thank you very much for having it.

CONAN: Thank you. And, Lisa Banks, are there a lot of cases where if you work for a paint company and you decide to leave, they will be asked to sign a nondisclosure agreement for the secret formula of the company's paint?

BANKS: Yeah. I mean, that could happen even while you're an employee. And he raises a good point in the sense that it's akin to a trade secret agreement or a confidentiality agreement that you sign when you're a existing employee to protect sensitive information or trade secrets. So those types of agreements can be part of an employment agreement that you sign when you start a job and follow you throughout your employment.

CONAN: And we've been talking pragmatics, a philosophical question to end with. There was an argument in one of the magazines today. In the case of sexual harassment or discrimination, why should we protect people who are violating other people's rights? Why should we have confidentiality agreements?

BANKS: Well, I think that, you know, many would argue that we shouldn't be able to have confidentiality, that people should be able to talk about these issues. But it's a contractual agreement. It's a private agreement, typically, between a company and its employer - I mean, employee. And, you know, if - the idea is that if you want to settle this case and if you want to receive this amount of money, one of the things that you're going to have to agree to is confidentiality because that's something that's going to be very, very important to the company. Other than a release of claims, it's probably the most important provision. And, you know, oftentimes for the victims themselves, it can be very important.

And, you know, in this case, I think, you know, even though these women could come forward and talk about this case, I think the legal risk is slight. But they may not want to come forward. But we - we're...

CONAN: We've seen the risk their reputations face in the papers, But...

BANKS: Yeah. We've seen what has happened to the woman who did come forward. So there are good reasons not to want to have that all out there.

CONAN: Lisa Banks, thanks very much.

BANKS: You're welcome. Thank you.

CONAN: Lisa Banks, an employment attorney with the firm Kats, Marshall & Banks, with us from her office here in Washington. Guest host John Donvan will be here on Monday to talk about what happens to town when the only business in town ups and leaves. I'm Neal Conan. It's the TALK OF THE NATION from NPR News.

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