On January 22, 2016, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration proposed a new rule that would amend the Federal Acquisition Regulation to implement a section of the Consolidated and Further Continuing Appropriations Act of 2015 (the “Act”) addressing contractors’ use of confidentiality agreements. The new rule would apply broadly to all solicitations and resultant contracts funded with fiscal year 2015 funds, as required by the Act.  In addition, contracts funded with subsequent fiscal year funds that include the same prohibition on confidentiality agreements as the Act would be governed by the same rule.

The proposed rule would require federal contractors to represent that they do not require employees or subcontractors to enter into agreements that would prohibit or otherwise restrict them from lawfully reporting waste, fraud, or abuse to a federal government or law enforcement representative. Under the proposed rule, contractors with covered contracts would be required to notify employees that any preexisting confidentiality or other agreements that do not conform to the rule are no longer in effect.

The proposed rule is open for public comment until March 22, 2016.

Confidentiality rules that restrict or could be viewed as restricting an employee’s ability to report improper conduct to the government have been a focus of various government agencies, including the EEOC and SEC, in recent years. Federal contractors should review their confidentiality agreements to determine whether they will need to be revised should the proposed rule become law (and to ensure compliance with other applicable government agency initiatives). As part of that analysis, contractors should review confidentiality agreements carefully and ensure that they have carve outs that explicitly permit employees and subcontractors to report in good faith instances of fraud, waste, and abuse to the federal government or law enforcement.