CFPB Warns Against Broad Employee Confidentiality Agreements Which Could Discourage Whistleblowers

The CFPB issued guidance asserting that broadly written employee confidentiality or non-disclosure agreements could violate whistleblower protections.

The Consumer Financial Protection Act (CFPA) provides that covered entities may not terminate or in any other way discriminate against employees who provide information to the government about possible violations of consumer financial protection laws or who engage in other protected whistleblower activity.  Discriminating against an employee in the whistleblowing context could include suing or threatening to sue the employee, or otherwise taking or threatening to take adverse action against the employee.

While noting that employee confidentiality agreements can serve legitimate purposes, the guidance states that overly broad confidentiality provisions could lead employees to believe that they would be sued or subject to other adverse action if they disclose information about suspected legal violations to the government.  In turn, the CFPB claims that using an overly broad confidentiality agreement which would seem to forbid or otherwise dissuade an employee from sharing information with the government could itself amount to a prohibited threat to punish the employee.

The guidance further indicates that an overly broad confidentiality agreement might not be cured by including, for example, a vague or non-specific statement that the restriction applies “to the extent permitted by law,” since an employee may not know that the law forbids restrictions on whistleblowing.  Instead, the CFPB asserts that an employer can reduce the risk of this kind of perception—and the risk of being accused of violating the CFPA’s whistleblower protections—by ensuring that its confidentiality agreements clearly state that employees are permitted to communicate freely with the government and to cooperate in government investigations.