Stop the Leaks! What if White House Staffers Were Independent Contractors?

Sessions stop the leaks independent contractorsTrump and Sessions wants to prosecute the leakers. As we’ve seen before, stopping leaks can become a Presidential obsession. In Nixon’s White House, the Plumbers were tasked with stopping leaks of classified information, such as the Pentagon Papers. Through the Committee to Re-Elect the President (fittingly, CREEP), members of the Plumbers broke into the office of the psychiatrist of Daniel Ellsberg, who had released the Pentagon Papers to The New York Times. Some of you may have heard about what happened next.

Presidential aides and White House staffers routinely have access to information that is intended to remain confidential. Businesses face the same issue. A company’s employees often have access to confidential or trade secret information that would be harmful in the hands of competitors, or that could damage the business if released to the general public.

It’s commonplace to require employees in such positions to sign Nondisclosure Agreements (NDAs).  NDAs typically define the scope of confidential information and require employees to refrain from using or disclosing any of it outside of work.

But what about independent contractors? Non-employees like specialists or consultants are often retained to work on sensitive company projects. In the course of that work, they are often granted access to confidential information.

Should independent contractors sign NDAs too? You bet! If they will be granted access to confidential or trade secret information, NDAs are important.

They can be used in a stand-alone agreement or as part of a broader independent contractor agreement containing other terms.

It is arguably even more important to have a contractor sign an NDA than it is for an employee to be required to sign one. Why?

Employees, by their nature, are agents of the company and are presumed to be acting to further the employer’s interests. NDAs are a useful reminder to employees of their obligations to the employer, and NDAs can expand — by contract — the scope of protection offered by trade secret laws.

Independent contractors, in contrast, are in business for themselves. They are generally not agents of the business, and any obligation they have to preserve confidential information will stem mainly from contractual obligations, rather than from trade secret law.

In fact, trade secret laws generally require a company to prove that it takes steps to safeguard the privacy of trade secret information — that is, steps to prevent other people from accessing it. By sharing trade secrets with a non-employee contractor, the company may — through that act alone — risk losing trade secret protection for their confidential business information.  They’ve shared it outside the company.

That is where NDAs come in. If a contractor is required to sign an NDA as a condition of the retention, then the employer can much more confidently share confidential and trade secret information with the contractor.

The NDA not only creates a contractual obligation on the contractor to preserve the secrecy of the information, but it also bolsters the company’s ability to show that it takes active steps to protect its confidential information. In other words, the NDA helps the business show that it does not tell an outsider its trade secrets without first obtaining a signed NDA.

The lesson here is simple. If your independent contractor will be granted access to confidential information — even incidentally or accidentally — NDAs can provide important protections to the business.

If the contractor leaks the information anyway, you can always find some goons to break into the office of the contractor’s psychiatrist to get some dirt on him.  (That was a joke. Don’t do that!) Legal remedies are available. Don’t break into anyone’s office. Please.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

Are You Protecting Confidential Information When Using Independent Contractors? Try These 2 Tips.

confidential information - independent contractors - top-secret-1076813_1920Do your independent contractors have access to confidential information?  Does your independent contractor agreement provide you with sufficient protection?

Tip #1: Be sure your independent contractor agreement includes a Confidential Information section. It should prohibit the contractor from using or disclosing confidential information at any time, including after the retention is completed.

Be sure, however, to consider these carve-outs to allow disclosure under these limited circumstances:

  1. When a subpoena or court order requires, but consider requiring the contractor to provide advance notice so you have the opportunity to contest the potential disclosure.
  2. To a government agency, as part of a complaint or investigation. The SEC and DOL/OSHA have taken the position that it is a violation of federal whistleblower laws to have a Confidential Information clause that is so broad that it prohibits revealing confidential information to a government agency when whistleblowing. Under this whistleblowing scenario, you cannot require the individual to alert you to the disclosure first.
  3. Under circumstances described in the Defend Trade Secrets Act (DTSA), which took effect in 2016. Under DTSA, a company can recover additional damages and attorney fees if an individual improperly discloses the company’s trade secrets if the company provides advance notice to individuals of their DTSA rights.

Here is a sample DTSA disclosure:

You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (x) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (y) solely for the purpose of reporting or investigating a suspected violation of law. You shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Furthermore, in the event you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the trade secret to your attorney and use the trade secret information in the court proceeding, if you file any document containing the trade secret under seal and do not disclose the trade secret, except pursuant to court order.

Tip #2: One other point to remember — and this is a common mistake: Make sure that when the agreement expires, the obligation not to disclose confidential information remains in effect. I have seen too many termination clauses where the agreement terminates, not just the relationship. If the entire agreement terminates, you may accidentally be terminating the contractor’s obligation to preserve confidential information after the engagement ends.

When you end an engagement, you probably want to terminate the engagement, not the entire agreement.

Have fun out there!

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.