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On January 22, 2016, the FAR Council proposed adding a new rule (link here) prohibiting federal dollars from going to companies that require employees to sign confidentiality agreements that could limit the ability of employees to report suspected fraud and abuse to the government.

The proposed rule comes at a time of increased attention on the use of confidentiality agreements by government contractors. As described here, a 2015 Report by the Office of the Inspector General for the State Department found that almost half of the thirty-highest grossing contractors had policies containing provisions that could have a “chilling effect on employees who wish to report fraud, waste, or abuse to a Federal official.” In April, the SEC fined contractor KBR for requiring employees to sign confidentiality agreements that the SEC believed prevented potential whistleblowers from reporting concerns to government agencies.

The proposed FAR rule implements Section 743 of the 2015 Consolidated and Further Continuing Appropriations Act. The rule requires that each offeror, in order to be eligible for award, must represent by submission of its offer that it does not require employees or subcontractors to sign internal confidentiality agreements that could restrict employees from lawfully reporting waste, fraud, or abuse. The proposed rule would apply to all contracts, except those related to personal services contracts with individual workers, regardless of amount, even including ones below the simplified acquisition threshold. Contracts for the purchase of commercial items, both special-order and off-the-shelf, would also be subject to the rule. The proposed rule requires modification of existing contracts to include the new FAR clause before obtaining Fiscal Year (“FY”) 2015 or subsequent FY funds that are subject to the same prohibition on confidentiality agreements.

In light of the proposed rule — and the 2015 Department of Defense class deviation implementing the substance of the rule on DoD contracts — contractors will want to review their internal policies and confidentiality agreements. Companies have a legitimate interest in protecting privileged and confidential information in connection with internal investigations, but companies may need to revise the language in their agreements if the agreement could be construed as restricting employees from providing the government with information regarding potential violations of law.

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Photo of Jason Crawford Jason Crawford

When facing government investigations or high stakes litigation, clients trust Jason Crawford to evaluate allegations, identify risks, and formulate strategies to achieve the appropriate resolution. Jason advises and advocates for government contractors and companies from regulated industries in matters involving civil, criminal, and…

When facing government investigations or high stakes litigation, clients trust Jason Crawford to evaluate allegations, identify risks, and formulate strategies to achieve the appropriate resolution. Jason advises and advocates for government contractors and companies from regulated industries in matters involving civil, criminal, and administrative enforcement, with a particular focus on the False Claims Act (FCA).

As a litigator, Jason has defended government contractors, drug manufacturers, grant recipients, health care companies, importers, and construction companies sued under the FCA by whistleblowers and the Department of Justice (DOJ) in federal courts throughout the country. He also helps clients conduct complex internal investigations and respond strategically to Office of Inspectors General inquiries, grand jury investigations, search warrants, and civil investigative demands.

Jason previously served as a DOJ Trial Attorney in the Civil Division, Fraud Section where he investigated and litigated FCA cases involving government contractors, importers, and health care companies. He also previously worked with the U.S. Attorney’s Office for the District of Columbia where he prosecuted federal criminal cases.

A recognized thought leader on FCA developments, Jason has written and presented extensively on the fraud statute, and he is a co-host of the Let’s Talk FCA podcast.

Photo of Charles Baek Charles Baek

Charles Baek is a counsel in Crowell & Moring’s Washington, D.C. office, where he practices in the Government Contracts Group.

Charles represents government contractors in both litigation and counseling matters. His practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), litigation…

Charles Baek is a counsel in Crowell & Moring’s Washington, D.C. office, where he practices in the Government Contracts Group.

Charles represents government contractors in both litigation and counseling matters. His practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), litigation before the Armed Services Board of Contract Appeals (ASBCA), federal regulatory and ethics compliance and due diligence, bid protests before the Government Accountability Office (GAO), and False Claims Act (FCA) investigations. His practice also includes state contracting due diligence and litigation before the Court of Federal Claims.