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Confidentiality Agreements in the Spotlight

The situation with Republican presidential candidate Herman Cain has not only put the spotlight on him (though not in the way he wants), but it also has drawn interest to confidentiality agreements in settlements. What are they, how are they used, and can the parties get out of them?

Candidate Cain apparently faced allegations of sexual harassment during his tenure running the National Restaurant Association in 1990s. These claims were settled, with each settlement including a confidentiality agreement that bars the parties from ever publicly discussing the issue again. As often occurs during a political campaign, these seemingly long-buried allegations have resurfaced, with at least one of the women involved seeking release from the confidentiality agreement. Cain denies the allegations, but hasn’t made any moves to encourage the restaurant association, which is the party to the settlement agreement, to allow the women involved to speak freely.

Parties often share a mutual interest in keeping the existence and terms of the settlement agreement confidential. For example, disclosure could be damaging to attempts to find other employment and could encourage “piggyback” claims, i.e., similarly situated employees asserting claims in the hope of obtaining a financial windfall.

Plaintiff’s counsel may, however, resist non-disclosure or confidentiality provisions because their clients may want to exercise their right of free speech. This is why generally a plaintiff will not agree to a confidentiality provision without additional consideration, i.e., larger damages.

On the other side, defense counsel want to be sure they can enforce the confidentiality provision, and some will seek agreement from opposing counsel that a plaintiff who nonetheless discloses the existence or terms of the settlement agreement agree to pay certain liquidated damages and attorney fees, if the employer prevails in a separate lawsuit for specific performance or breach of contract.

Even after they’re signed, “[c]onfidentiality agreements are also often renegotiated,” the Washington Post blog The Fix explains. This can happen when, for example, an employer needs to reveal details of an employee’s departure as part of a lawsuit, or when an employee is applying for a new job and needs to explain his or her record.

And then there’s always the Cain situation, in which the allegations have gone public despite the confidentiality agreement.

The question on many minds now is whether the confidentiality agreements involved in the Cain situation can be renegotiated implicitly in the press. By making statements about the allegations and payments made to the women involved, has Cain violated the confidentiality agreement, leaving his accuser free to speak? Not according to Douglas Mirrell, an attorney with law firm Loeb & Loeb in Los Angeles, who told that “even if Cain broke a confidentiality agreement, that does not necessarily give his accuser free license to speak to the media. Instead, it could lead to another lawsuit…for breach of contract of the settlement agreement.”

In any event, Debra Katz, an expert in sexual harassment and employment law, told The Fix that it is “incredibly unlikely” that the National Restaurant Association would sue Cain’s accuser for speaking out now.

What do you think about the status of the confidentiality agreements in Cain’s situation? Could they be enforced?

For more on confidentiality provisions in settlement agreements, including information on enforcing such agreements, go to CEB’s Wrongful Employment Termination Practice, chap 12.  On the related issue of using confidentiality agreements to protect trade secrets, turn to CEB’s California Business Litigation, chap 4.

© The Regents of the University of California, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

3 replies on “Confidentiality Agreements in the Spotlight”

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