Certain Gags on Defense Contractor Employees Are Now Illegal

Defense contractors are well-aware that if they do not follow the law and do not abide by the terms of their contracts with the United States, they can be held liable under the False Claims Act. Often the Government would not know about fraud, except that an insider comes forward to report fraud to the Government. These insiders often report fraud using the False Claims Act’s qui tam provisions, which often allow for a reward to a successful whistleblower. You read more about the False Claims Act and its whistleblower provisions here.

Rather than commit to ethical behavior, disclose nonconformities to the United States, and do things the right way, many companies would rather bury the evidence and ship nonconforming product to the United States anyway. These companies try to avoid liability by forcing employees and contractors to sign Confidentiality Agreements to keep their jobs. This muzzles employees, who believe that they are contractually bound not to report fraud and illegalities to the United States.

It is one thing to require employees to keep true trade secrets to themselves—things like the formula for Coca-Cola, or new manufacturing processes and techniques. But it is another thing to try to stop employees from contacting the Government to report illegalities and fraud.

The Department of Defense recently decided that it will no longer contract with entities who require their employees and contractors to sign internal Confidentiality Agreements that purport to bar employees from lawfully reporting fraud, waste, or abuse to the a designated investigative or law enforcement representative of a Federal department or agency authorized to receive such information. Employers that have such prohibitions are required to notify employees that any such prohibitions are no longer in effect. DFAR 252.203-7998, 252.203-7999. View these regulations here. Hat tip to Jason Zuckerman for alerting us to this new regulation.

Are you aware of a company that has cheated or defrauded the United States, but are concerned about a Confidentiality Agreement? We are happy to discuss your legal options with you in confidence. You can obtain guidance from experienced legal counsel by contacting us.