Nondisclosure agreements, often referred to as NDAs, have become one of the most common legal documents that workers sign. Researchers estimate over one-third of the U.S. workforce is bound by an NDA.
Adam Froman, CEO of research technology company Delvinia says the likelihood that a company will request workers, clients, or business partners to sign an NDA has "more than doubled" over the past several decades.
"Fifteen years ago, I might have been involved with maybe two NDAs in a year," he says. "Now, I would say every single business relationship I have signs an NDA."
CNBC Make It spoke with experts, employers, and employees about why NDAs have exploded in popularity — and what it means for the way we work.
Get New England news, weather forecasts and entertainment stories to your inbox. Sign up for NECN newsletters.
Why organizations use NDAs
Organizations from a wide range of industries, from entertainment to technology, use NDAs for a wide range of purposes, from protecting proprietary information to quieting potentially disgruntled former employees. At their core, NDAs are a tool to control what information leaves an organization.
"Typically, a company is asking an employee or a potential employee to sign an NDA because there will be conversations that are confidential," explains Eric Harkins president and founder of GKG Search & Consulting. "It's usually because there is a strategy or new opportunity for that organization that they do not want anyone (specifically, their competitors) to know about."
Money Report
And as business has become increasingly digital and competitive, organizations must prioritize creating and protecting intellectual property to maintain their competitive advantage against some of the world's most dominant corporations, argues Harkins.
"The world has become an incredibly competitive place. It always has been, but companies like Amazon have changed the landscape and created new challenges that companies face to drive revenue," he says. "If a company or individual has a new idea, it's important that that is not shared with people who could steal or replicate that idea before the company is ready to move forward."
Froman adds that in addition to the increased value of intellectual property in the modern economy, the prioritization of data privacy and concerns organizations have about reputation management have driven the increase in the use of NDAs.
Worker concerns
While all of those CNBC Make It spoke with agreed that NDAs have the potential to be a reasonable tool for modern organizations, many also said they can place uncomfortable pressure on employees.
"I sign NDAs all the time for acting gigs," says actress and comedian Natasha Mercado. She adds that "for commercials, in your self-tape or in-person audition, they say 'Consider this as your signing your NDA not to post or talk about the project.'"
"I've probably signed [an NDA] for every job that I've had in some shape or form," says Carolyn Bergier, a podcaster and comedian who also does freelance copywriting work. "Almost to the point where it feels like a routine."
Lilly Mosley director of business development for Soulful Synergy says she signed an NDA while doing consulting work for a start-up that she wishes she hadn't signed.
"They had me sign an NDA and I guess I didn't really read it well," she says, explaining that she did not realize the document included a clause that banned her from working in the same field as the start-up for life. "I look back at the NDA, and it was like a lifetime NDA. So even if I was interested in doing something with that idea, I never could in my entire life. That was a bummer."
The enforceability of such non-compete clauses varies by state and in 2021, President Biden asked the Federal Trade Commission to ban or limit companies from using them.
Producer and writer Katherine has signed multiple NDAs throughout her career but asked CNBC Make It not to publish her name for fear that future employers would see any critique of NDAs as "suspicious."
"I remember being a little freaked out the first time I signed an NDA because I was 21 and it was my first industry job," says Katherine. "I remember a producer was like, 'This is just a formality.' Which put me at ease."
And while Katherine says she understands why studios ask employees to sign NDAs, she admits they can be "scary"
"I would never want to spoil a movie, for example. But there are little voices in the back of your head where you're like, 'What if something bad happens to me? Can I talk about it?'" she asks.
This fear that an individual with a negative work experience might be held back from speaking out is one reason why many unions now include stipulations that ban the use of NDAs over issues such as sexual harassment or discrimination.
"One of the very first proposals be put up when we got to the bargaining table for our first CBA was a proposal that bans the use non-disclosure agreements for sexual harassment and discrimination," says Nick Guy, a senior staff writer for Wirecutter and the chair of Wirecutter's union. "We don't ever want any of our folks to feel like they can't speak about unsafe working conditions."
Who benefits from an NDA?
For reasons such as these, workers should be sure to read any legal document carefully, consult with a legal professional when applicable and ask questions if they have any. Because ultimately, organizations are the ones who benefit from NDAs the most.
In the case of workplace harassment or discrimination, Froman says NDAs are difficult to legally enforce and should not hold individuals back from speaking out.
"If somebody has legitimate evidence of abuse, I don't think an NDA would ever stand to stop them from addressing it," he says. "NDAs have just become an extra layer of protection for an employer."
In general, Froman says that it is rare for organizations to seek legal means to enforce an NDA because it can be hard — and expensive — to prove an NDA has been broken. And yet, they continue to be a go-to defense measure for organizations, including when letting workers go, as a means to protect their reputation.
"The company typically benefits [the most,]" from an NDA says Harkins. "They are protecting themselves from having sensitive or confidential material shared outside of the organization."
"I don't know how necessary NDAs really are. I think they just can make a company or organization feel safer," says Mosley. "But when it comes to a legal document I think it's most regular people are at a disadvantage. We live in an age where you're presented with Terms and Conditions every time you do anything — and nobody is reading those."
Don't miss:
