California Court Rules Google’s NDAs Violate Labor Law

California Court Rules Google’s NDAs Violate Labor Law

A California judge has ruled that Google’s confidentiality agreements with employees are too broad and violate state labor laws.

As the Washington Post reported,

A Google employee identified as John Doe argued that the broad nondisclosure agreement the company asked him to sign barred him from speaking about his job to other potential employers, amounting to a noncompete clause, which are illegal in California. In a Thursday ruling in California Superior Court, a judge agreed with the employee, while declining to make a judgment on other allegations that Google’s agreements blocked whistleblowing and sharing information about wages with other workers.

The lawsuit was originally filed in 2016. According to an earlier ruling in the case,

In their competition causes of action, plaintiffs allege that Google’s confidentiality rules violate state statutes by preventing employees from using or disclosing the skills, knowledge, and experience they obtained at Google for purposes of competing with Google. For example, the policies prevent Googlers from disclosing their wages in negotiating a new job with a prospective employer, and from disclosing who else works at Google and under what circumstances such that they might be receptive to an offer from a rival employer. …

In their freedom of speech claims, plaintiffs allege that defendants’ confidentiality rules prevent employees from engaging in lawful conduct during non-work hours and violate state statutes entitling employees to disclose wages, working conditions, and illegal conduct. … This lawful conduct includes the exercise of an employee’s constitutional rights of freedom of speech and economic liberty. As a practical matter, plaintiffs argue, they are forbidden even to write a novel about working in Silicon Valley or to reassure their parents they are making enough money to pay their bills, matters untethered to any legitimate need for confidentiality.

As the court noted, California has a strong public policy against non-competes, which California courts won’t enforce under most circumstances.

Section 16600 of the California Business and Professions Code prohibits any contract that would improperly restrain an employee from securing new employment with a competitor.

This policy “has been seen as instrumental in the success of California’s technology industry” and “provided a pole around which Silicon Valley’s characteristic business culture and structure precipitated.”

As the National Law Review reported,

On July 9, 2021, President Biden signed the Executive Order on Promoting Competition in the American Economy, which encourages the Federal Trade Commission (“FTC”) to employ its statutory rulemaking authority “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” Executive Order, Section 5(g). While the language in this executive order refers to the “unfair” use of non-compete clauses, the Biden administration’s explanatory statement makes clear that “the President encourages the FTC to ban or limit non-compete agreements” altogether.

As the Post notes,

This year, a new California law went into effect called “Silenced No More,” which outlaws confidentiality agreements for settlements involving any form of discrimination or harassment, expanding existing employee protections in the state. The bill was championed by Ifeoma Ozoma, a former public policy official at Pinterest and Facebook, who raised awareness about gender and race discrimination against Black women at Pinterest.

Google may still appeal the decision.

The decision, if it stands, may affect how other companies draft their employment and non-disclosure agreements.

Categories: Litigation