A recent circular released by the Consumer Financial Protection Bureau (CFPB) “is an important step in expanding the protection of whistleblowers from being silenced due to illegally broad NDAs” according to whistleblower attorney Benjamin Calitri.
The CFPB released the circular on July 24, warning that broad and restrictive nondisclosure agreements (NDAs) may violate federal whistleblower protection laws.
“Imposing sweeping nondisclosure agreements that do not clearly permit communication with law enforcement may intimidate employees from disclosing misconduct or cooperating with investigations,” the CFPB explains. “This could impede investigations and potentially violate federal whistleblower protections.”
In a new article for the NYU Program on Corporate Compliance and Enforcement blog, Calitri, an associate at Kohn, Kohn & Colapinto details the CFPB’s circular and outlines its impact.
Calitri explains that the CFPB has determined that Section 1057 of the Consumer Financial Protection Act prohibits employers from taking actions to “prevent or dissuade employees from whistleblowing.”
According to Calitri, “the CFPB understands and makes perfectly clear that the threat of the NDA itself is discrimination and is, therefore, a violation of Section 2057 ‘regardless of whether or not the employer acts upon them or a court actually would enforce a confidentiality agreement with respect to whistleblowing.’”
The CFPB’s circular follows recent enforcement efforts by both the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to crack down on NDAs which restrict whistleblowing.
“The CFPB’s Circular, taking a stance against illegally broad confidentiality agreements meant to silence whistleblowers, is an important step in expanding the protection of whistleblowers from being silenced due to illegally broad NDAs,” Calitri writes in conclusion. “By clearly stating that these agreements can be viewed as discrimination under Section 1057, the CFPB joins the stand that the SEC and CFTC have taken through their actions, especially in the past year, to ensure that NDAs are not used to silence whistleblowers.”
Further Reading:
Consumer Financial Protection Bureau Stands Up to Protect Whistleblowers from Overly Broad NDAs
Broad NDAs which Silence Whistleblowers May be Illegal, CFPB Warns