The Facebook whistleblower Frances Haugen raised the question: Does the law protect whistleblowers who violate their non-disclosure agreements? As with most legal questions, it depends.
Gardner Employment Law analyzes non-disclosure agreements and whistleblower claims. If you believe you may have a whistleblower claim but fear retaliation, reach out to us.
Who Qualifies as a “Whistleblower”?
A whistleblower is an employee who reports a company’s illegal activity to regulators, such as Congress, the SEC, or law enforcement. You can be a whistleblower by reporting fraud, as one example. Under some laws, a whistleblower receives a reward, reporting fraud of federal funds, as another example.
What if the employee has contractually promised never to disclose the information? Can the employee nevertheless report the illegal activities? The NDA (non-disclosure agreement) adds complication to the matter.
Frances Haugen Blew the Whistle on Facebook
Former Facebook employee Frances Haugen is a textbook example of a whistleblower. On October 5th, 2021, Haugen testified before a Congressional Committee about Facebook increasing the spread of misinformation and Facebook’s other platform, Instagram, causing injurious effects on adolescents. While still employed by Facebook, Ms. Haugen had secretly copied thousands of the company’s internal communications supporting her claims.
Because of Ms. Haugen’s previously signed NDA, she faced potential legal ramifications for her report. Fortunately for her, the high-profile nature of the case and Congress’ earlier scrutiny of Facebook make it difficult for Facebook to retaliate against Ms. Haugen for taking the confidential information. You may not enjoy such clear cut protection.
What Happens if a Whistleblower Signed an NDA?
In the normal situation, signing an NDA creates a binding contract. Many high level executives and managers have signed a confidentiality agreement as a part of the hiring process. When an employee signs an NDA, the purpose is to protect the company’s trade secrets, confidential information, and intellectual property.
Other company documents may contain confidentiality clauses. Even if an employee does not sign an NDA. Texas law requires employees to maintain the confidentiality of their employer’s proprietary information. Companies gain additional benefits by obtaining a signed contract in which the employee agrees not to disclose confidential information. In Texas, generally the prevailing party in a breach of contract lawsuit can recover its attorneys’ fees.
Companies can potentially sue those who break their non-disclosure agreements. According to the Wall Street Journal, these lawsuits can force the employee to return severance money, forfeit any stock options they received, or pay damages. Attorneys’ fees and costs are piled on top of that. All of this deters the parties from violating the contract.
As we discuss in “Whistleblowers,” under Texas law an employee who reports illegal conduct by a private corporation has no legal protection as a “whistleblower.” In Winters v. Houston Chronicle, the plaintiff employee was terminated after he reported what he believed was illegal activity. The Texas Supreme Court held that whistleblowing did not come within the limited circumstances permitting an exception to the termination at-will rule. There is, however, a Texas whistleblower statute that protects governmental employees.
How Can Whistleblowers Prevent Retaliation from Their Employer?
Federal laws offer whistleblower protection for employees who report an employer’s illegal acts. Some of these even provide rewards for making such reports:
- The False Claims Act, which requires payment to whistleblowers of between 15 and 30 percent of the government’s monetary sanctions collected if they assist with prosecution of fraud in connection with government contracting and other government programs;
- The Dodd-Frank Act, which requires payment to whistleblowers of between 10 percent and 30 percent of monetary sanctions collected if they assist with prosecution of securities and commodities fraud; and
- The IRS whistleblower law, which requires payment to whistleblowers of 15 to 30 percent of monetary sanctions collected if they assist with prosecution of tax fraud.
Other federal statutes permit the employee to assert and litigate a whistleblower claim. One notable statute is the Sarbanes-Oxley Act. This statute came about because Sherron Watkins reported the internal wrongdoing of Enron executives, which brought down the entire corporation. In 2002, this Act was passed in order to add protections for corporate whistleblowers who are employees of publicly traded companies who have reported violations to the SEC.
A list of federal whistleblower statutes can be found on the website of The National Whistleblowers Center.
If you are worried about breaking your NDA with a whistleblower claim, get an expert whistleblower attorney on your side. At Gardner Employment Law, we prioritize the privacy of an attorney-client relationship and can advise you about legal protections. Give us a call today.