Oregon's Nondisclosure Agreement Law

Oregon's new Nondisclosure Agreement (NDA) is codified at ORS 659A.370 ("Employer prohibited from entering into agreements that prevent employee from discussing certain unlawful conduct; exceptions; remedies"); Senate Bill 726 (2019 Regular Session).

Oregon's new law is part of a national trend to prevent employers from imposing overly broad NDAs.

(1)   Introduction to Oregon's New Nondisclosure Agreement Statute

ORS 659A.370 has immediate implications for many pre and post-employment nondisclosure agreements, including clauses in severance agreements, employment contracts, and confidentiality agreements. Employees must carefully review employer-proposed NDAs and, where appropriate, actively negotiate these agreements to protect important rights.

Oregon's statute prevents employers from proactively or retroactively using NDAs to cover up information relating to employment-based discrimination, harassment, and retaliation. ORS 659A.370 promotes transparency and accountability in employment contracts, severance agreements, and settlement agreements.

As of this article's last update, there have not been any court opinions interpreting ORS 659A.370. Employees and employers alike should be extremely careful regarding this statute because it contains important rights and obligations!

(2)   ORS 659A.370 Bans NDAs That Cover Up Employment-Related Discrimination

ORS 659A.370 makes it an unlawful employment practice for any employer to enter into any NDA that has "the purpose or effect" of preventing "disclosing or discussing" conduct that constitutes discrimination under ORS 659A.030, 659A.082, 659A.112.

This includes disclosure or discussion of legally prohibited forms of discriminatory harassment. This statute will apply broadly in many situations given the identified statutes, which cover many common issues with unlawful employment-related discrimination, retaliation, and aiding & abetting (e.g., age, gender, sex, race, religion, disability, uniformed service, etc.).

Employees aggrieved by unlawful NDAs have private claims against noncomplying employers. Remedies for violations include economic damages, noneconomic damages, and costs and attorney fees. See Section (4), infra., and ORS 659A.885.

(2)   Which NDAs are Unlawful Under Oregon Law?

ORS 659A.370 does not ban all nondisclosure agreements. 

Subsection (1) specifies: 

"[I]t is an unlawful employment practice for an employer to enter into an agreement with an employee or prospective employee, as a condition of employment, continued employment, promotion, compensation or the receipt of benefits, that contains a nondisclosure provision, a nondisparagement provision or any other provision that has the purpose or effect of preventing the employee from disclosing or discussing conduct" defined in the statute.

ORS 659A.370(1)(a) and (b) define the types of disclosures or discussions with which an NDA may not interfere. If an NDA prevents, in purpose or effect, any employee from disclosing or discussing a covered topic, it is an unlawful employment practice for the employer to enter into it.

Figure 1 depicts ORS 659A.370(1)'s standards:
ORS 659A.370 reveals several legal issues:

     (a)   "Purpose or effect"

The "purpose or effect" language in ORS 659A.370(1) makes this statute widely applicable. The Oregon legislature was clearly concerned with preventing employers from entering into any NDA that might chill communications about discrimination, harassment, or retaliation.

Therefore, even if an employee cannot prove that an NDA actually prevented her/him from disclosing or discussing a protected topic, the employer may still be liable for violations if an agreement's purpose is to prevent covered disclosures or discussions.

This "purpose or effect" standard is reminiscent of the "permit or suffer" standard under the Fair Labor Standards Act (FLSA). The "permit or suffer" standard creates liability for employers who allow violations to occur, not just those that intend for violations to occur. Whether an employer's NDA agreement prevents or has the purpose or effect of preventing disclosure or discussion, it will fall within ORS 659A.370. This statute does not account for intent.

     (b)   "Preventing the employee from disclosing or discussing"

This language also results in broad applicability. NDAs are, by their nature, designed to prevent employees from disclosing certain information. Employers may have perfectly valid reasons for protecting disclosure of certain information. However, employer's valid interests aside, if an NDA also prevents disclosure of information related to protected forms of discrimination, employers will be liable under this statute.

The practical result of ORS 659A.370 will be to strongly discourage employers from offering overly broad and boilerplate nondisclosure terms. Many NDAs define "confidential" using example lists of covered information. If employers are not thoughtful and precise with the language they use, they may find themselves liable for damages and attorneys' fees in the kinds of cases that ORS 659A.370 was clearly meant to incentivize.

For example, if an NDA defines "confidential information" to include all of the employer's "processes" without any limitations, then employees may be able to argue that the agreement prevents disclosure of discriminatory processes and therefore violates ORS 659A.370. There are many other examples of broad language that can have the "purpose or effect" of preventing the disclosure or discussion of discriminatory conduct.

     (c)   "Conduct that constitutes discrimination prohibited by ORS 659A.030, 659A.082, or 659A.112"

ORS 659A.030 is Oregon's primary anti-discrimination statute in the employment context and prevents employer-related discrimination or harassment based on "race, color, religion, sex, sexual orientation, national origin, marital status or age." ORS 659A.030 also prevents employers from engaging in retaliatory conduct and prohibits individuals from aiding or abetting unlawful employment practices. See e.g., ORS 659A.030(1)(f) and (g).

ORS 659A.082 prohibits discrimination based on uniformed service (e.g., the "Armed Forces of the United States, the Army National Guard and the Air National Guard when engaged in active duty for training, inactive duty training or full-time National Guard duty, the commissioned corps of the United States Public Health Service and any other category of persons designated by the President of the United States in time of war or national emergency." ORS 659A.082(1)(b)).

ORS 659A.112
prevents employers from discriminating "in compensation or in terms, conditions or privileges of employment on the basis of disability." ORS 659A.112(1)

ORS 659A.370 does not seem to address the standard for determining whether conduct constitutes prohibited discrimination for the purpose of protection under the statute. Must there be actual discrimination for a violation to occur? (e.g., if the violation arises from an employer "entering into" the agreement, it may not matter whether discrimination occurs) Is an employee's subjective belief sufficient to trigger the statute protection? Is there an objective component to whether conduct is prohibited discrimination? What happens if the employee turns out to be wrong about the conduct being discriminatory? These and many other questions are fact specific and must be assessed on a case-by-case basis (ideally with the help of a good legal advisor).

     (d)   Where and between whom the conduct occurred

ORS 659A.370 distinguishes between conduct that occurs "between an employer and an employee" and "between employees." Depending on the circumstances, the statute establishes liability based on whether covered communications occurred on or off the employer's premises and based on whether the relevant event was worked-related and coordinated by or through the employer.

(3)   Certain employee-requested NDAs may be permissible

Employers may still include NDAs in "settlement, separation or severance" agreements that would otherwise be unlawful under subsection (1) if they satisfy two prerequisites. First, the NDAs are permissible "only when an employee claiming to be aggrieved [...] requests to enter into the agreement." ORS 659A.370(2). The second requirement is that "the employee has at least seven days after executing the agreement to revoke the agreement." ORS 659A.370(3). An "agreement may not become effective until after the revocation period has expired." Id.

The statute's wording leaves two significant areas where factual disputes will likely arise: (1) is/was the employee "claiming to be aggrieved?" and (2) did the employee "request to enter into the agreement?"

First, by including the phrase "claiming to be aggrieved," the legislature has incentivized parties to clarify whether an employee has a grievance, as opposed to a mere suspicion or concern. If it is unclear that an employee is "claiming to be aggrieved," then employers that proceed with NDAs run the risk of engaging in an unlawful employment practice. In this sense, ORS 659A.370 encourages employees and employers to be more transparent about discrimination and retaliation-related concerns. This may provide a useful context for  parties to more openly discuss severance and settlement options.

Second, there will doubtlessly be many factual disputes over whether an employee "request[ed] to enter into the [NDA]." The statute does not clearly address, for example, how it might apply to an employer that mentions to a departing employee an optional severance payment that the employee may receive upon "request." Some employers will certainly push the limitations of this statute in order to continue foisting NDAs on employees. However, given the wording of ORS 659A.370(2), the gold standard for an employee-requested NDA is an agreement that an employee requests on her or his own volition without any suggestion from an employer. Anything less than that and employers are risking expensive lawsuits until courts begin issuing interpretive rulings.

(4)   Right to Sue / Remedies

ORS 659A.370(5) provides employees with a private action for remedies under ORS 659A.885(1)-(3). These remedies may include damages (economic and non-economic), injunctive relief, attorneys' fees, costs, and the right to a jury trial. The availability of broad remedies under ORS 659A.885 makes this a very powerful statute for employees.

(5)   NDAs with Employees Who Engaged in Prohibited Conduct

ORS 659A.370(6) allows NDAs where "an employer makes a good faith determination that an employee has engaged in [prohibited] conduct." Prohibited conduct refers to any "conduct prohibited by ORS 659A.030, including sexual assault, conduct prohibited by ORS 659A.082 or 659A.112 or conduct prohibited by this section." Therefore, if an employer determines in good faith that an employee has engaged in prohibited discrimination, the employer may impose an NDA on the employee despite ORS 659A.370(1)'s prohibition against doing so.

One potential effect of this section is to encourage employers to memorialize and take action whenever it determines that an employee has engaged in prohibited conduct. This is certainly a positive effect in many situations (it makes it easier for employers to remove bad actors). However, I also anticipate, based on my experience, that some employers will be incentivized to trump up allegations under ORS 659A.370(6) as a means of protecting perceived confidential information and retaining control over current and former employees.

(6)   Carve-Out for Mandatory Reporters

Finally, ORS 659A.370(7) contains a carve-out for mandatory reporters: 

"This section does not apply to an employee who is tasked by law to receive confidential or privileged reports of discrimination, sexual assault or harassment."

This carve-out means that employers are not prohibited from entering into NDAs with mandatory reporters. It is worth noting that this subsection only applies to employees who are "tasked by law" to receive reports. The fact that an employee may be designated internally to receive reports will not be sufficient to qualify for this carve-out.