Silence for Sale: Confidentiality Agreements

Most people know the First Amendment of the U.S. Constitution guarantees one’s freedom of speech.  But there are exceptions and limitations on this right.  For one, the First Amendment only applies to governmental restraint of speech.  So the First Amendment really is not the proper sword to a private individual or non-governmental entity’s attempts to curb your speech.  Second, the right to speech does not allow you to make false statements without consequences.  False statements that cause harm to a person or organization’s reputation could amount to defamation and cost you money!

Freedom of speech is one of those things that is hard to quantify in terms of money.  That is what is it worth to speak one’s mind?  This question is addressed and often answered in the context of confidentiality agreements.  A confidentiality agreement is, simply put, where an individual or entity voluntarily waives the right to speak on certain matters or to certain persons, etc.  Confidentiality agreements are most frequently seen as part of resolution of a lawsuit or legal matter.

Confidentiality agreements are often designed to prevent bad facts and situations from coming to light and sullying the reputation or standing of the company or individual seeking the silence.  I represent consumers in cases against debt collectors and sometimes the company seeks to buy my client’s silence. That is, the company seeks an agreement from my client not to disclose the terms of a settlement (i.e. how much money the company paid my client). For example, if a debt collector had called my client on several occasions about a debt and employed vile language, threats, racially offensive language, and other caustic verbal communication and the debt collector then decided to compensate my client for multiple violations of the law, surely the debt collector would not want the whole world to know the compensation provided to my client.  Heck, the debt collector may not even want it known that it settled the case for fear of someone thinking the settlement was an admission of liability.

It is not the case that every settlement, release, or other resolution of a legal matter involves a confidentiality agreement.  I have been practicing over 15 years and confidentiality agreements have been signed by clients in fewer than 2% of my cases. Consequently my default position is that since a confidentiality agreement is not a normal settlement provision, if the company or other party wants my client to waive his freedom of speech there is compensation due for said waiver.  The amount paid for confidentiality will vary with the matters sought not to be discussed and divulged but the point of the matter is the client should be paid.  The client has the right to share the results of the case and other facts so long as it does not constitute defamation or another violation of the law.

If you are engaged in a legal dispute or litigation and there is discussion of a proposed confidentiality agreement I implore you to tread carefully.  You should consult legal counsel before agreeing to sign such an agreement especially if you are being asked to sign it without receiving some extra compensation.


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