Can Corporations Blackmail Employees to Not Talk?

When corporations blackmail employees they are firing by demanding promises in exchange for severance, should the courts honor the contracts?

Let me answer the question I pose right up front: No.

I believe in free markets, free trade, and the observance of enforceable contracts. But we have limits. For example, if a fast food restaurant only hired teenagers if they signed a contract promising to never buy fast food at any other retail chain for the rest of their lives, on the penalty of having to pay back all wages they ever earned, no matter how much time has elapsed since they were employed, I think we would all recognize that the restaurant had overstepped its lawful powers. You can’t trick people into becoming lifetime slaves.

But what about corporations setting conditions on receiving a severance package for adult employees being laid off? I think it depends on the nature of the conditions. In this case, reported by the Washington Examiner, the condition was for the laid off employees to be quiet:

Exhibit A in the abuse of H-1Bs was the case of Southern California Edison, which recently got rid of between 400 and 500 IT employees and replaced them with a smaller force of lower-paid workers brought in from overseas through the H-1B program. The original employees were making an average of about $110,000 a year, the committee heard; the replacements were brought to Southern California Edison by outsourcing firms that pay an average of between $65,000 and $75,000.


“Simply put, the H-1B program has become a cheap labor program,” Hira, author of the book Outsourcing America, testified. “To add insult to injury, Southern California Edison forced its American workers to train their H-1B replacements as a condition of receiving their severance packages.”


But one voice was missing from the hearing, and that was the voice of laid-off workers. That was no accident. In addition to losing their jobs and being forced to train their foreign replacements, many fired workers are required to sign non-disparagement agreements as a condition of their severance. They are workers with families and bills to pay, and they are told that if they do not agree to remain silent, they will be terminated with cause, meaning they will receive no severance pay or other benefits and will face an even tougher search for a new job and a continued career. So they remain silent.

I’m not opposed to the market setting labor prices. While I think there are political reasons to limit immigration, I’m not moved by economic rationales. However, while companies have a legitimate interest in keeping some secrets, they don’t have a right to lie to the public to artificially boost their reputation. And that is what Southern California Edison is doing in this case: they are trying to inflate their image by hiding information from the public. They are demanding that these employees lie by omission for them.

It shouldn’t stand.

[See also, “Barack Obama: I Promise to Train You for Jobs and Legalize Foreigners to Take Them.”]

Furthermore, claiming that any non-cooperative employee was fired “with cause,” would be a straight-up lie and a form of the intentional inflicting of economic damage on an employee through that lie. It ought to lead to a big fat lawsuit and the employees should win it. Is there some statute that big business got pushed through the California legislature that gives them a free pass to lie and threaten people with the damage that will come through these lies?

I suppose the problem is that California is not an “at will” state. But I don’t think a person can be contractually obligated to lie for an employer, in any circumstances. Once they have the severance they can tell the truth and the company should have no power to get the courts to punish them. Furthermore, even though I think California should be an “at will” state, the fact remains that the company and the employees entered into a relationship with the presupposition that California law regulated the relationship.

By threatening the employees, the company is changing the rules. If they aren’t proud of changing their labor force, then they should decide not to do it. Hiding the truth is not an option.