DoD Prohibition on Confidentiality Agreements Designed to Cover Up Fraud, Waste, and Abuse

Some companies have required employees to sign confidentiality statements as a way of preventing (or at least discouraging) employees from reporting fraud, waste, and abuse to Federal investigators. Contractor employees, like Government employees are protected under various whistle-blower statutes yet some companies are taking the position that disclosures of fraud, waste, and abuse are tantamount to disclosing, reporting, or disseminating insider or company proprietary information. Also, most companies, when made aware of fraud, waste or abuse within their organization, would prefer to resolve the issue internally rather than having it drug through the public square. To forestall or prevent that from happening, there have been reported instances where contractors have required employees to sign non-disclosure to Federal investigative agencies of instances of fraud, waste, and abuse.

That is about to change for Defense contractors. Yesterday, the Director of Defense Procurement and Acquisition Policy announced that effectively immediately, no DoD funds will go to contracts with companies requiring its employees, seeking to report fraud, waste, or abuse, to sign internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or contractors from lawfully reporting such wste, fraud, or abuse to a designated investigative or law enforcement representative of a Federal department or agency authorized to receive such information.

Specifically, the prohibition, now codified in DFARS (DoD FAR Supplement) at 252.203-7998 and 252-203-7999 state:

The Contractor shall not require employees or subcontractors seeking to report fraud, waste, or abuse to sign or comply with internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or contractors from lawfully reporting such waste, fraud, or abuse to a designated investigative or law enforcement representative of a Federal department or agency authorized to receive such information.

And, if the contractor has already made its employees or subcontractors sign such confidentiality agreements, it must advise everyone that the agreements are no longer in effect.

The Contractor shall notify employees that the prohibitions and restrictions of any internal confidentiality prohibitions and restrictions of any internal confidentiality agreements covered by this clause are no longer in effect.

You can read more of the new DoD policy by clicking here.