Hush Contracts Corrupt Everyone Who Signs Them

One of the most haunting scenes in Ronan Farrow’s book Catch and Kill arises from an interview with the former NBC News producer who accused the Today host Matt Lauer of rape. Having finally recounted a devastating tale for the record, she responds to a series of questions about the network with a rote refrain: “I am obliged to tell you that I cannot disparage Andy Lack, or Noah Oppenheim, or any other employee of NBC News.” Her freedom to describe her own life is circumscribed by the nondisclosure agreement she had to sign as a condition of a settlement.

From news coverage of Lauer, the Hollywood producer Harvey Weinstein, the former CBS chairman Les Moonves, and other high-profile figures credibly accused of sexual abuse, the American public is learning more all the time about the use of nondisclosure agreements—or NDAs, otherwise known as hush contracts—to keep wrongful behavior out of the public eye. Indeed, NDAs have an even broader reach. Other signatories of such agreements include U.S. government employees who have promised not to reveal what they witness at the Trump White House and former Theranos employees who are bound to secrecy about the disgraced health-tech company. Hush contracts enable one party to buy the other party’s silence; they are the kill in the phrase catch and kill.

In the latest iteration of the #MeToo movement, activists are pressuring media organizations such as NBC and Fox to release victims of sexual harassment from their obligations to keep quiet about what they know. As professors of contract law, we believe hush contracts like these should be legally unenforceable. A private agreement to hide information important to public safety, whether it is sexual harassment or government corruption, is unlikely to hold up in court no matter what. But the psychological implications of hush deals are at least as troubling as the legal consequences. The purpose and the effect of a hush contract are to exert social and emotional pressure on victims or observers of wrongdoing.

All contracts affect the thinking of the people who sign them, regardless of whether the deals are virtuous. Most people see contracts as legal promises, and agreements embodied in formal contracts assume a veneer of moral seriousness. One of the core features of the moral psychology of contracts is that invoking a party’s consent to a deal—even when that consent was granted under dubious pretenses—introduces an element of self-blame.

In our own research, the two of us have studied how contracts encourage people to blame themselves for terms that are more or less foisted upon them. In one study, we asked participants to read a story about a man confronted with an unusual fee in a car-rental transaction. Half of the participants read that the fee was described in fine print hidden deep in a long, convoluted contract of the sort that few consumers ever read; half read that it was posted somewhere on the company website, but was not part of the contract. Then we just asked: Who is to blame for this unhappy customer paying an extra $200? Should he fight the policy? If it was in the contract, most respondents said the consumer is to blame and the fee is legitimate; a bad policy on the website, on the other hand, was deemed to be the company’s fault and rightly subject to consumer challenge.

In concert with a growing contract-psychology literature, our experiments suggest that people imbue contracts with a punitive morality: People feel more to blame for the bad deals that they have taken than the same bad deals imposed via noncontractual means—even when there is no practical difference in the level of choice or the amount of notice they had. In everyday consumer transactions gone wrong, you feel regret and shame because you should have read the fine print or should have known better. Consent shifts the blame to the consenter—and away from the party that created the predicament in the first place.

Hush contracts exploit humans’ psychological instincts in even more perverse ways. They confront those with knowledge of wrongdoing with a gantlet of ethical compromises. In the case of sexual-harassment claims, NDAs require the victim to explicitly agree to protect her predator from public scrutiny, making her formally complicit. They describe a deal that exchanges money to compensate for an act of unwanted intimacy after the fact. It’s a classic case of what cultural psychology calls a “taboo trade-off”—a transaction that infringes on a society’s sacred values. And, of course, the deal sets the stage for a final violation, because it turns any subsequent act of truth-telling into a broken promise.

It is true that financial settlements, which are routinely conditioned on a hush contract, have real value for individual victims of sexual harassment. They pay the rent when an employee’s best option is to quit an abusive workplace, they pay for the lawyers, and they protect the victim herself from unwanted publicity. But they do these things at a cost that is not obvious from the terms of the deal. From the perspective of moral psychology, the document itself casts aspersions on its signers: In settling, both emerge compromised.

In this context, a recent NBC statement purporting to offer a release deserves attention:

Any former NBC News employee who believes that they cannot disclose their experience with sexual harassment as a result of a confidentiality or non-disparagement provision in their separation agreement should contact NBCUniversal and we will release them from that perceived obligation.

This appears to be a carefully lawyered sentence full of puzzling phrases. Why do individuals need to contact NBC before they are released? Couldn’t NBC issue a broad indulgence? Why only former NBC News employees (are there independent contractors who should still consider themselves bound)? But let’s focus just on the words believe and perceive.

The statement cites employees’ beliefs and perceptions, but not what the agreements actually say. The words appear to preserve some formal deniability about the intended scope of the NDAs. But contractual obligations usually are or are not. When we teach contract law to first-year law students, we remind them relentlessly that what matters is the objective evidence of obligation, not the idiosyncratic subjective mental state of one party.

In fact, the statement is more correct than its authors know. The perceived obligation is the whole point. The deals are almost certainly unenforceable anyway. Does that eliminate their consequences for victims of sexual harassment? No; they exist in part to terrorize. Hush contracts are insidious because they can work whether the courts will enforce them or not.

In California and a handful of other states, hush contracts are now explicitly banned in sexual-harassment cases. That often means that such deals wouldn’t be enforced in court, whether firms like NBC release their counterparties or not. Courts won’t, for example, force a silenced victim who now wishes to speak to return the money she received. National bans are pending before Congress.

But even if no court in the land would enforce these deals, it does not mean that terms in existing contracts will vanish, nor that companies will not attempt to preserve their reputations by buying silence in the future. (In California, workers are sometimes asked to sign non-compete agreements even though those, too, are not legally enforceable.) For firms, whether a court will ultimately uphold a hush contract is in some ways sort of beside the point. Threat of legal action, with its intimation of moral opprobrium, is enough to deter many complaints. The damage is done the moment a hush agreement is signed.

For these reasons, refusing to enforce a contract, which may have seemed radical only a few years ago, doesn’t go far enough. A real solution would also levy penalties on employers that try to pressure employees to participate in conspiracies of silence. Which is why legislatures should treat hush contracts like they do other illegal agreements—those that fix prices, conspire to commit crimes, evade regulatory authorities—and utilize the tools of public law to quash them. We can punish, ideally with fines, drafters of hush contracts, their lawyers, and the entire ecosystem of fixers that flourished in their wake.

From corporate America to the White House, employers have pushed employees to sign nondisclosure agreements because the law lets them get away with it. But we can stamp out these practices, which have corrupted organizations and unfairly implicated vulnerable people. The only way to eliminate the psychological weight of hush contracts is to deter employers from drafting them at all.