Businesses have a legitimate interest in protecting confidential and sensitive information as well as their public reputation. Requiring employees to sign non-disclosure and non-disparagement agreements (NDAs) are one method of ensuring that. These written agreements may also be used with third-party contractors and volunteers (especially to political campaigns).
NDAs may also have the effect of limiting an individual’s free expression rights under the First Amendment. Therefore, the agreements require a delicate balancing of the inherent rights of the two parties.
Jessica Denson was hired by the Trump campaign in 2016 as a Hispanic outreach director. She accused the campaign of sex discrimination. Under the terms of the NDA, an arbitrator was appointed and issued a $50,000 award against her for violating the terms of the agreement. The arbitrator based his ruling only on the terms of the NDA. It was not his role to decide whether the NDA was actually enforceable. That award was later overturned.
Denson then filed suit against Donald J. Trump For President, Inc. in Federal court, claiming that the NDA was so broad in its scope that it was not enforceable and was an unwarranted intrusion on her Constitutional right of free expression.
The Federal District Court judge examined the NDA to see if it was “reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.” Yesterday's ruling said it was clearly not.
For example, the agreement placed NO limits on time and area. It also was incredibly broad as to the people and entities who were “protected” by the agreements.
The provision applies not only to President Trump and his family members – including unnamed spouses, children, and grandchildren – but also to any legal entity ‘that, in whole or in part, was created by or for the benefit of . . . or is controlled or owned by’ President Trump or any of his family members. President Trump himself is affiliated with more than 500 companies, and his family members may be affiliated with yet more.
Showing that the NDA was overly broad was only half of Denson’s battle. She next needed to show that her free expression would likely be infringed by it. In other words, would there be an attempt to enforce it?
In many cases, this would be difficult to prove. Here, Trump did it for her. All the court needed to do was to quote his tweets. Here is one of the many that the court quoted.
[On] August 31, 2019, President Trump tweeted, ‘...Yes, I am currently suing various people for violating their confidentiality agreements. Disgusting and foul mouthed Omarosa is one. I gave her every break, despite the fact that she was despised by everyone, and she went for some cheap money from a book. Numerous others also!”
The court concluded:
[T]he Campaign has engaged in a pattern of enforcing or threatening to enforce the Employment Agreement’s non-disclosure and non-disparagement provisions against former Campaign employees, including Denson, Newman, Sims, and Johnson. And the primary intended beneficiary of the Employment Agreement – President Trump – has tweeted about his efforts to enforce non-disclosure agreements. Given this record, Denson has demonstrated a “well-founded fear” that the Employment Agreement will be enforced against her.
Trump’s lawyers tried one last gambit. Maybe the court could salvage the good parts of the NDA, something called “blue lining.” The judge said no, that the agreement was not salvageable without a complete rewrite.
To summarize, the NDA attempted to do much more than just protect legitimate business interests and Denson was harmed by it.
Denson’s win only applies to her own NDA. However, it is likely that others who were required to sign similar agreements may also try to get them declared invalid.
Considering that dozens, if not hundreds, of similar NDAs exist out there, the exposure to the Trump organizations is extensive. Therefore, expect an appeal of this ruling.