According to allegations filed with the Securities and Exchange Commission (SEC), some Silicon Valley firms are forcing their employees to sign supposedly illegal labor agreements. These agreements allegedly bar workers from reporting their employers’ misbehavior to the SEC, violating multiple federal laws.
Labor agreements, or employment contracts, are broad documents dictating the terms of a worker’s employment at the company. Among the major elements of many tech companies’ contracts are non-disclosure agreements (NDAs) intended to protect confidential information.
NDAs are increasingly controversial nationwide, but they are still federally permissible. However, a few specific laws regulate what is and is not enforceable within an NDA. One crucial regulation is the Dodd-Frank Act, a financial reform law intended to prevent future financial crises like the 2008 meltdown. This law prohibits employers from discouraging workers from filing whistleblower reports to the SEC.
This law is important because it prevents companies from retaliating against workers who do the right thing and report fraud. However, many employees don’t realize that they have this protection.
The problem reported by the SEC tipsters is that the NDAs in question bar all types of sharing of confidential information, with no exception for SEC reports. As such, employees who are not completely versed in current financial regulations may not know they are protected if they file a report. As a result, these NDAs illegally discourage reporting in violation of the Dodd-Frank Act.
This is not only a problem for the economy as a whole. It also puts individual workers at risk. If someone files an SEC report and is fired for it, their NDA may lead them to believe they have no recourse. This is untrue.
The Dodd-Frank Act and other whistleblower protection laws allow all workers, including Silicon Valley employees, to report potential violations to the relevant regulatory agencies without fear of retaliation. Regardless of what an NDA or labor agreement might state, workers cannot be penalized for reporting violations.
Unlawful NDAs are a common form of illegal labor contract, but they are far from the only one. Employees should learn their rights under federal law so they know when they have the right to fight back against unlawful retaliation.
What Makes a Labor Agreement Illegal?
The U.S. federal government has relatively permissive labor laws compared to many other countries. Employers can set whatever terms they like within the agreement as long as an employment contract doesn’t violate a worker’s rights. It is generally considered the employee’s responsibility to understand the contract before they sign it.
However, there are still plenty of things that cannot be included in a labor agreement. While employers may try to add these things to their contracts, they are not considered enforceable. Examples of these unlawful clauses include:
- Whistleblowing bans: The Department of Labor bars all forms of retaliation for whistleblowing to regulatory agencies. Regardless of what a contract might state, employees have the right to file whistleblower reports without risking their employment.
- Wages less than mandatory minimums: The minimum wage is just that: the legal minimum. Employers must pay workers the highest minimum wage in their area. Failing to do so is unlawful, even if the employee agreed.
- Discriminatory policies: Employers cannot discriminate based on someone’s protected characteristics in contracts or elsewhere. This includes adding clauses to employment contracts with penalties for things like getting pregnant, taking protected leave, or becoming disabled.
- Sexual assault and harassment arbitration clauses: As of 2022, no employer may force workers to pursue arbitration for claims of sexual assault or harassment. Provisions that require this are considered unenforceable. Additionally, retaliating against a worker for these claims is often considered discrimination.
Many states expand upon federal laws to further limit what may be included in an employment contract. For example, California does not permit NDAs to cover any form of discriminatory behavior by the employer. Additionally, the state bars non-compete agreements entirely outside of extremely specific circumstances.
How to Stand Up Against Unlawful Employment Contracts
If you are subject to an unlawful employment contract, you have more options than you may realize. The Department of Labor, the SEC, and other regulatory and enforcement agencies have a vested interest in protecting your right to fair employment. Here’s what you can do if you need to fight back against illegal and unenforceable contracts in your workplace:
- Get copies of your contract and any other relevant papers. Your contract is the single best piece of evidence in these cases. Get a copy of the agreement you signed in its entirety. If it references other documents, such as a policy handbook or dress code, collect those documents as well.
- Document any enforcement of the unlawful clauses. In some cases, an unenforceable contract is not enough for a claim. If your employer has tried to enforce the unlawful clauses, document its actions. For example, save communications about retaliation for blowing the whistle or penalties for failing to follow discriminatory policies.
- Speak to an experienced employment attorney. Next, talk to a lawyer about your case. A skilled attorney can help you put your case in order and guide you through the rest of the process of holding your employer accountable.
- File a report with the relevant agency. In many cases, you will need to report your employer to a regulatory agency for violating labor laws and other regulations. Your attorney will help you produce this report and file it correctly without risking your employment.
- Consider taking legal action. After making your report, your attorney will counsel you on when and how to file a lawsuit against your employer to seek damages for any losses you may have suffered because of the unlawful contract.
At the Law Offices of Todd M. Friedman, we have decades of experience representing employees facing unfair or illegal working conditions. If you want to fight back against an illegal contract, we can help. Schedule your free consultation now to discuss your case and learn the next steps toward fairer employment.
