What, Exactly, Is an NDA?
If you pay any regular attention to the news cycle (or for that matter, network TV police procedurals), you’ve probably noticed one legal term popping up over and over again: non-disclosure agreements, or NDAs. Over the past few years, NDAs have been used by the wealthy and the powerful, from Harvey Weinstein to the President of the United States to Theranos CEO Elizabeth Holmes, to silence former employees or people in their inner circle from speaking out against them. And as more information has emerged surrounding the mechanisms by which large corporations and the uber-wealthy use NDAs to maintain this culture of silence, more people are speaking out against them, to the degree that New Jersey governor Phil Murphy recently signed legislation rendering them unenforceable.
“These secret settlements can ultimately endanger the public by hiding sexual predators from law enforcement and the public,” Senate Majority Leader Loretta Weinberg, the sponsor of the bill, told the New Jersey Globe. “They are being used by those who have the money to pay for privileged immunity.”
But what actually are NDAs, what is the cost of breaking them, and what does the future of NDAs look like now that legislation like Weinberg’s is becoming more widespread? We asked a few lawyers to explain.
What are NDAs, and how did they become widespread?
NDA stands for “non-disclosure agreement, though it’s also known as a confidentiality agreement. Either way, it’s a clause in a legally binding contract that requires the signer not to disclose sensitive information, with significant financial penalties if they breach the agreement.
No one quite knows “what evil genius defense lawyer came up with the idea of NDAs. It’s a damn good question,” says Neil Mullin, a partner in the firm Smith Mullin and a trial and appellate lawyer who has fought NDAs for Gretchen Carlson, among other defendants. But we do know they initially arose around the 1970s, as a way for nascent tech companies to protect their intellectual property.
In theory, NDAs are intended to protect a company’s financial interests in guarding proprietary information, says Jason Bach, an attorney based in Las Vegas. “If you’re working at Apple and your job is to design the new iPhone, it makes sense that you’ll have to agree not to release that information and they’ll have you sign an NDA,” he says, adding that NDAs are common “any time you’re dealing with intellectual property or any type of design or development.”
That started changing, however, around the 1990s, when Mullin says that NDAs started to become more common in employment contracts and settlement contracts in various industries. “You couldn’t even settle minor cases with non-controversial clients without agreeing to an NDA,” he says. He speculates that NDAs became more popular because the legal firms representing big companies had adopted them for themselves. “They may have instituted a regime of secrecy in their own workplaces, and they liked it, and they recommended it to their own clients,” he says.
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https://www.rollingstone.com/culture/culture-features/nda-non-disclosure-agreements-809856/
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