Questioning the Legitimacy of Gag Clauses From the Perspective of the Dodd-Frank Wall Street Reform

Outline

  1. Article Summary: Questioning the Legitimacy of Gag Clauses from the Perspective of the Dodd-Frank Wall Street Reform
  2. The Underlying Ethical Issues and the Related HR Problems: Silencing Employees
  3. The Possible Legal Concerns: The Rule That Goes Against the First Amendment
  4. Relevance to the Course: Exploring the Issue of Employment Contracts and Employment-Related Regulations
  5. Implications of Gag Clauses for the Domestic and the Global Business Environment

Article Summary: Questioning the Legitimacy of Gag Clauses from the Perspective of the Dodd-Frank Wall Street Reform

In an article recently published in the Wall Street Journal, “De Facto Gag Clauses: The Legality of Employment Agreements That Undermine Dodd-Frank’s Whistleblower Provisions,” authors Moberly, Thomas, and Zuckerman explore the issue of gag clauses and their legitimacy in the contemporary global business environment. According to the authors, despite the Dodd-Frank Law provisions, modern companies are managing to convince their employees to sign agreements that compel the latter to refrain from disclosing controversial information about the organization to the public. As a result, opportunities for whistle-blowing are unavailable.

The Underlying Ethical Issues and the Related HR Problems: Silencing Employees

The choice between providing staff members with an opportunity to point out injustice in the workplace environment, as stated in the Civil Rights Act, is the primary dilemma to be addressed in the case in point. Approaching the case from the perspective of Human Resource Management, it is necessary to admit that the very concept of whistleblowing is based on an entirely legitimate premise. Therefore, retaliating against the employee who is going to or already has exposed to the public unethical choices made by the company ought to be barely possible.

More importantly, the fact that the gag clause as a phenomenon lacks ethical substance needs to be called upon as the foundation for HR-related decisions. Therefore, it is imperative that HR managers should create an environment in which the use of the gag clause should not be necessary. It would be wrong to imply that avoiding biases in the context of a large corporation will be a possibility. However, the entrepreneurship must focus on increasing its transparency, so that its essential transactions, large decisions, and other important steps in its development should become visible to all those concerned. Furthermore, it will be imperative to make sure that the identified elements of the firm’s operations should be available to the members of the public. With a focus on the enhancement of transparency, the firm is likely to address some of the aspects of its operations that might be deemed as unethical. Furthermore, the principle of transparency will contribute to shaping corporate ethics and values, thus building an environment in which trustful relationships, based on mutual respect of the stakeholders involved (i.e., the employee and the employer), is possible.

From an HR perspective, the dilemma can be resolved by designing a strategy that will help in offering a response to whistleblowing allegations, as well as focusing on the promotion of corporate values among staff members to avoid possible ethical problems. The use of a gag clause, in its turn, must be avoided at all costs, as it abuses the staff’s right to free speech. Instead of imposing the idea of a gag clause as the primary means of making staff members committed to the organization, HR representatives must consider offering the employees additional opportunities for experiencing corporate transparency.

The Possible Legal Concerns: The Rule That Goes Against the First Amendment

The concept of a gag clause clearly contradicts democratic ideas in the context of a business environment. As stated in the First Amendment, the members of American society are invited to share their concerns about the legitimacy of their companies’ choices, in accordance with the Freedom of Speech principle:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances. (The United States Congress 1)

Consequently, by suggesting that the employees should sign a gag clause, the company infringes upon their right to free speech. The legal repercussions of the identified step are deplorable—in fact, the employees working in a company that compels them to sign a gag clause are eligible to sue the organization for abusing their rights and freedoms. According to a recent study, “A law that simply banned an organisation or individual from communicating about legal reform or political change would likely infringe the constitutional freedom” (Gray 460). The politics of silencing that the use of gag clauses implies is bound to trigger a fierce response from the staff members, who are under the protection of the First Amendment and the concept of the Freedom of Speech.

More importantly, the authors of the article point to the fact that the use of gag clauses has a direct and negative impact on consumers, as it prevents them from learning any information about the potential dangers that purchasing the services and goods of a certain company may entail for them. Dodd-Frank’s Public Policy states explicitly that the principles of non-retaliation should be employed when addressing cases of whistleblowing. However, gag clauses imply that, by making the illegal or unethical actions of a company public, an employee should suffer because of exposing the firm’s private data (Ponte 121).

Therefore, the legal repercussions of compelling staff members to sign a gag clause, as well as following it in situations that ethically require that an employee should disclose the company’s policy to the public, are dire in the context of the US legal system. Differently put, the premise that a gag clause, as a concept, is based on is not only ethically but also legally questionable, which makes it illegitimate as a corporate HR policy (Goldman 4).

Relevance to the Course: Exploring the Issue of Employment Contracts and Employment-Related Regulations

The information provided in the article served as a foil for building knowledge about the dilemmas related to whistleblowing. The authors of the article shed a lot of light on the issue of employee laws and the effects that they have on the relationships between staff members and the companies that hire them. Furthermore, the authors of the article articulate some of the most controversial aspects of the subject matter, making it explicit that clarity and transparency must be used as the foundation for building the communication process between the parties involved.

The study pushes the envelope, by suggesting that gag clauses go against the principle of Dodd-Frank’s Public Policy. Thus, the authors explore the subject matter from the perspective of all parties involved, including the managers, the staff, and the customers.

Finally, the fact that the research addresses corporate policies and contracts that attempt to make Dodd-Frank’s Public Policy null and void in the context of particular entrepreneurship needs to be mentioned. Moberly et al. make it very clear that the lenient approach that the US government shows toward gag clauses is bound to affect not only the relationships between the employee and the employer in particular, but also the growth rate of the economy, in general.

Implications of Gag Clauses for the Domestic and the Global Business Environment

Gag clauses are bound to affect the transparency of companies’ processes. As a result, possible legal issues might be avoided, yet organizations will be exposed to a range of external threats such as accusations of infringing the employees’ rights. Taking a closer look at the very concept of a gag clause, one must admit that it is based on an entirely unethical premise, and undermines the foundations of democratic principles, especially the idea of the freedom of speech. In forcing employees to sign a gag clause, HR representatives expose themselves and the company to a legal threat, i.e., the possibility of being sued or, worse yet, the termination of the company’s license, due to its unethical and illegal practices.

Moreover, a lack of trust in the relationships between an employee and a manager should be listed among the dire consequences of pyrsuinging the use of gag clauses within the environment of the US economic and legal systems, as well as in the context of the global market, in general. The lack of opportunity to voice their concerns is likely to cause the staff members to experience a rapid drop in their motivation and loyalty to the company. Furthermore, as a part of the process of abusing gag clauses, companies may have an opportunity to file vexatious lawsuits in order to benefit from their employees and their lack of awareness about the subject matter (The United States District Court Middle District of Florida Tampa Division 29). Therefore, the problem of gag clauses must be addressed on several levels, starting with legislative practice and principles.

Works Cited

Goldman, Eric. An Assessment of the Consumer Review Freedom Act of 2015. Santa Clara, CA: Santa Clara University, 2015. Print.

Gray, Anthony. “Government funding of non-governmental organisations and the implied freedom of political communication: The constitutionality of gag clauses.” Australian Journal of Political Science 48.4 (2013): 456-469. Print.

Moberly, Richard, Jordan A. Thomas, and Jason Zuckerman. “De Facto Gag Clauses: The Legality of Employment Agreements That Undermine Dodd-Frank’s Whistleblower Provisions.” ABA Journal of Labor & Employment Law 30.1 (2014): 87-120. Web.

Ponte, Lucille M. “Protecting Brand Image or Gaming the System? Consumer “Gag” Contracts in an Age of Crowdsourced Ratings and Reviews.” William & Mary Business Law Review 7.1 (2016): 59-149. Print.

The United States Congress. The First Amendment. 1791. Web.

The United States District Court Middle District of Florida Tampa Division. Federal Trade Commission, Plaintiff, v. Roca Labs, INC., et al., Defendants. 2015. Web.