Date of this Version
North Carolina Law Review 96 (2018), pp 751-788.
I. A (BRIEF) HISTORY OF WHISTLEBLOWING IN THE LAST FIFTEEN YEARS: A. Antiretaliation Protections, B. Bounty Provisions. C. Structural Disclosure Channels
II. THE CORPORATE RESPONSE. : A. Using Confidentiality Provisions, B. Results from Broad Study of Settlement Agreements—1. Brief Background on the Study, 2. The Prevalence of Confidentiality Provisions.
III. GOVERNMENT COUNTERMOVES: A. SEC Rule 21F-17, B. OSHA Guidance, C. Government Contractors
Companies often require confidentiality from their employees. Maintaining corporate secrets helps protect intellectual property and gives a company an edge in a competitive marketplace. The law generally supports this corporate desire for secrecy through statutes that prohibit disclosing trade secrets and by enforcing agreements requiring confidentiality from employees, even if those agreements bar employees from working for a competitor in order to keep the employees from revealing secrets. As a result, companies have utilized this legal structure aggressively to enforce trade secret laws, confidentiality agreements, and non-competition provisions.
Whistleblowing can undermine confidentiality. An employee blows the whistle by revealing inside information-often organizational misconduct-to an outsider, such as a government regulator.' This disclosure, by definition, contains information the corporation would rather keep secret. Even if a company intends to correct and punish the underlying misconduct internally, whistleblowing can cause significant disruption because the company has to manage increased oversight from the government, bad publicity, and heightened public scrutiny. Once the information is revealed externally, companies can have a harder time fixing the underlying problem because battle lines are drawn and positions become entrenched. Nevertheless, over the last fifteen years, the law-in particular federal law-has increasingly encouraged whistleblowing as a means of corporate oversight. Newly enacted federal statutes broadly protect whistleblowers from retaliation, require corporate structures that make whistleblowing easier, and even reward employees who reveal certain types of corporate misconduct.
In short, the federal government has aggressively encouraged employees to become whistleblowers. In response, corporations have tried to mitigate potential damage by relying on broad confidentiality provisions to discourage employees from revealing insider information. As a result, uncertainty abounds when the corporate desire for confidentiality clashes with the government's desire for employees to blow the whistle.
This Article is about the increasing tension between these countervailing trends. Part I describes the government's increased encouragement of whistleblowing during the last fifteen years. Part II demonstrates that corporations have responded to this trend by including in employment agreements broad confidentiality provisions that potentially limit the ability of employees to become whistleblowers. Finally, Part III explains recent moves by government agencies to regulate the breadth of these confidentiality provisions in order to mitigate their impact on whistleblowing. Ultimately, the Article concludes that the government's ability to rely on insiders to monitor organizational behavior by blowing the whistle will depend on the government's willingness to regulate the ability of an organization to protect its secrets through contract.