RSSFinancial institutions that impose nondisclosure agreements not allowing for communication with law enforcement can impede investigations and violate federal whistleblower protections, according to a recent Consumer Financial Protection Bureau circular.
Employers requiring employees to sign a confidentiality agreement during an internal investigation warning them not to discuss the subject with external parties and claiming they would face legal consequences for doing so is a “particularly egregious” violation, according to the report. Another example is specifying that an employer can file a lawsuit or terminate an employee for violating the NDA.
Employees involved in or with knowledge of an investigation who are required to sign such an agreement could see it as a threat against whistleblowing, according to the bureau. Employers can sharply reduce the risk of violating whistleblower protections by ensuring NDAs explicitly allow employees to communicate freely with government enforcement agencies and to cooperate in government investigations.
“Although nondisclosure agreements can be entered into for legitimate purposes, such as ensuring the protection of confidential trade secrets, such agreements, depending on how they are worded and the context, could lead employees to believe they would face lawsuits or other retaliation for reporting suspected misconduct to governmental authorities,” according to the CFPB.
Congress has passed a law protecting whistleblowers from retaliation for reporting when consumer financial protection laws are broken.
“The law enforcement community uncovers serious wrongdoing by financial firms through whistleblower tips,” said CFPB Director Rohit Chopra. “Companies should not censor or muzzle employees through nondisclosure agreements that deter whistleblowers from coming forward to law enforcement.”
