October 16, 2019
Donald Trump made headlines last month by announcing that his Trump National Doral resort near Miami is seeking to host the G-7 Summit, an annual meeting of the leaders of seven highly industrialized nations. But he should be careful what he wishes for.
The government will have to award a contract to the facility it selects as the site for the 2020 G-7 Summit. If the Trump Organization becomes a government contractor, federal law could force the company to loosen its nondisclosure agreements.
CREW has filed a related complaint with the State Department’s Inspector General because Trump National Doral hosting the G-7 Summit would violate the Constitution’s Domestic Emoluments Clause and raise conflict of interest issues under federal procurement law. But there’s something else President Trump should consider: Government contractors are subject to significant legal restrictions.
One such restriction prohibits the use of federal funds to pay any contractor that uses overly restrictive nondisclosure agreements. A provision of the federal appropriation that funded the government in fiscal year 2019 provided:
None of the funds appropriated or otherwise made available by this or any other Act may be available for a contract, grant, or cooperative agreement with an entity that requires employees or contractors of such entity seeking to report fraud, waste, or abuse to sign internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or contractors 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.
Although fiscal year 2019 ended on September 30, this language remains in effect under the terms of a continuing resolution that funds the government through November 21. Identical language has appeared in past appropriations, so it’s likely to show up again in any final fiscal year 2020 appropriation.
In addition, a provision of the Federal Acquisition Regulation, section 52.203-19, incorporates this same restriction. It supplies specific language for government contracts limiting the use of nondisclosure agreements by government contractors.
For example, a recent contract solicitation by the State Department’s diplomatic security team, which seeks hotel rooms for the G-7 Summit and other events, puts prospective contractors on notice that the contract will include this language: “(a) The Contractor shall comply with the following Federal Acquisition Regulation (FAR) clauses, which are incorporated in this contract by reference… (1) 52.203-19, Prohibition on Requiring Certain Internal Confidentiality Agreements or Statements (Jan 2017).”
News reports suggest that this federal contract language could be a problem for the Trump Organization. Both before and after taking office, President Trump reportedly has demanded that his employees sign highly restrictive nondisclosure agreements. According to NPR, “Trump routinely required employees to sign agreements promising not to reveal secrets of the Trump Organization.” The Washington Post described “breathtakingly broad prohibitions” in nondisclosure agreements Trump has used in the White House, noting that they “appear to be drawn heavily from similar contracts used in the past by the Trump Organization.”
These agreements are by no means inconsequential to President Trump. CNN reported that Trump “claimed he’s suing ‘various people’ who worked for him for violating their confidentiality agreements – a threat he’s often made – after [the] departure of Madeleine Westerhout, one of his longtime [White House] aides.” Trump will likely find it difficult to enforce White House nondisclosure agreements, which may violate the Constitution. But he has enjoyed some success with his campaign’s nondisclosure agreement.
In 2018, the Texas Tribune released a Trump 2016 campaign nondisclosure agreement, which required campaign staff to provide the campaign with written notice before making any disclosure of confidential information required by law. The agreement required that staffers delay making these legally required disclosures until the Trump campaign had “a reasonable opportunity to seek an appropriate protective order or similar relief” – and it required them to affirmatively join the campaign in this effort to avoid disclosure. The agreement further barred them from disclosing any information that was not “absolutely legally required to be disclosed,” which potentially created risk for staffers if opinions differed as to what the law “absolutely required” them to disclose. It also required them, upon request by the campaign, to “destroy all documents, memoranda, notes or other writings prepared by you or anyone on your behalf that are based upon the Confidential Information.”
Notably, the campaign nondisclosure agreement obtained by the Texas Tribune incongruously referred to the Trump campaign as the “Company” – suggesting it was modeled on the Trump Organization’s nondisclosure agreements. If the Trump Organization uses similar nondisclosure agreements, the requirements to delay making legally required disclosures and to destroy documents upon request could run afoul of the federal contractor restrictions on nondisclosure agreements “prohibiting or otherwise restricting” disclosures of fraud, waste and abuse to the government.
Though we have not seen a Trump Organization nondisclosure agreement, CBS Evening News reported in a 2017 story that it had obtained a copy of one. That nondisclosure agreement was described by an employment attorney as highly restrictive:
“I have reviewed confidentiality agreements in international, family-run hospitality organizations and . . . I have never seen a loyalty code to a family like this,” said Debra Soltis, who has specialized in employment law for more than 25 years. . . . Soltis says the agreement could discourage would-be whistleblowers. Because even though the company code of conduct requires employees to be truthful in any government inquiry, the confidentiality agreement has a clause saying if an employee is required by law to disclose confidential information, they have to notify the Trump Organization.
The Trump Organization strongly denied Ms. Soltis’ characterization of its nondisclosure agreements, which it claimed were consistent with the standard practices of the hospitality industry. This denial does not, however, resolve the question of whether the Trump Organization’s nondisclosure agreement could meet the high standards for federal contractors under applicable appropriations and procurement authorities.
If not, there’s a cure – but Trump may find it to be strong medicine.
The government has explained that contractors can come into compliance by issuing a “blanket notice of nonenforcement” to employees and subcontractors who have signed nondisclosure agreements. That could be a bitter pill for Trump to swallow. He seems to like his nondisclosure agreements the way they are.