Today (January 19, 2017), the Employee Internal Confidentiality Agreements or Statements Federal Acquisition Regulation (the “Rule”) goes into effect. The Rule prohibits the government from contracting with companies that require employees or subcontractors to sign “internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or subcontractors 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.” The commentary to the Rule explains that “designated” representatives are employees of the applicable agency’s Office of Inspector General. The Rule applies to all solicitations and contracts (including contracts for Commercial Off-the-Shelf items (“COTS”)) using fiscal year 2015 funds or funds from any subsequent fiscal year.

Going forward, contractors will be required to certify in connection with bids on new contracts or maintenance of existing contracts, that they have no non-compliant confidentiality agreements and will not enter into any non-compliant confidentiality agreements with their employees and subcontractors. If the contractor represents that it has non-compliant agreements currently in effect, the contractor is ineligible for the new contract.

Excluded from the Rule are “confidentiality agreements arising out of civil litigation and confidentiality agreements that contractor employees or subcontractors sign at the behest of a Federal agency.” Thus, contractors need not be concerned about settlements entered into during litigation or federally-mandated confidentiality agreements.

Key Takeaways

Contractors should immediately review their existing employee and subcontractor confidentiality agreements to ensure compliance. To the extent any non-compliant confidentiality agreements exist, contractors should, consistent with guidance in the Rule, issue a notice to existing employees and subcontractors that such agreements, to the extent they conflict with the Rule, are no longer in effect, and have employees and subcontractors sign compliant confidentiality agreements.