Hunton Employment & Labor Perspectives

The Consumer Financial Protection Bureau (the “CFPB”) has added itself to the list of agencies that view broad confidentiality agreements given to employees with scepticism. In a Circular published on July 24, 2024, the CFPB stated that requiring employees to sign a broad confidentiality agreement could violate Section 1057 of the Consumer Financial Protection Act (the “CFPA"). Section 1057 of the CFPA provides protection for whistleblowers from termination, discrimination, or retaliation for providing information to an agency or governmental authority relating to a violation of a law subject to the CFPB’s jurisdiction.

In the Circular, the CFPB takes the position that “in certain circumstances requiring employees to sign confidentiality agreements that are so broad as to forbid or otherwise dissuade employees from sharing information about potential law violations with the government or cooperating with a government investigation can amount to a threat to punish.” This position is based on an expansive reading of the statute. Still, the CFPB is not the only agency to view broad confidentiality agreements as a threat to punish for whistleblower activity. The Securities & Exchange Commission ("SEC") has also taken the position that overly broad non-disclosure and confidentiality agreements violate provisions protecting whistleblowers from discrimination or retaliation. The SEC has brought charges against an employer for requiring overbroad confidentiality agreements with current or former employees. The National Labor Relations Board ("NLRB") has also cautioned employers, noting that broad confidentiality agreements can tend to interfere with, restrain, or coerce employees’ exercise of rights provided by Section 7 of the National Labor Relations Act.

The CFPB’s position does not support punishing an employer for all confidentiality agreements. Confidentiality agreements that are limited in scope to protect the interests of employers to protect their trade secrets, financial, or client data, should pass muster. Additionally, disclaimer language should be added to agreements to ensure no employees misinterpret confidentiality agreements as prohibiting whistleblower activity.

The issuance of the CFPB’s Circular demonstrates the importance of ensuring confidentiality agreements, whether given at the beginning of employment, or at another time such as in a severance agreement, are carefully drafted to avoid unintended consequences. Employers should avoid using boiler-plate broad language for confidentiality agreements, and instead consult counsel to ensure the agreement is tailored to both protect interests and avoid liability.