On July 24, 2024, the CFPB issued a circular to law enforcement agencies and regulators explaining how companies may be breaking the law by requiring employees to sign broad nondisclosure agreements that could deter whistleblowing. The circular explains how imposing sweeping nondisclosure agreements that do not clearly permit communication with law enforcement may intimidate employees from disclosing misconduct or cooperating with investigations.
According to the CFPB, whistleblowing plays an important role in addressing illegal and unethical misconduct. The circular explains that financial institutions may violate the CFPA when they require employees in certain circumstances to sign broad nondisclosure agreements, or other types of agreements that contain confidentiality requirements, if the agreements do not clearly permit communications or cooperation with law enforcement. The circular points out serious situations that usually break the law. One example is when an employer forces a confidentiality agreement during an internal investigation, telling employees not to discuss the case with outsiders and warning them of potential legal penalties. If an employee must sign this agreement, they might view it as a threat against reporting wrongdoing.
According to the circular, an employer can lower the risk of violating whistleblower protections by clearly allowing employees to talk freely with government agencies and assist in investigations. The CFPB’s action builds on prior efforts to affirm whistleblower protections and collect reports of misconduct.
Read the CFPB’s press release here.
The Circular can be found here.