Ethermac Exchange-Miss USA resignations: Can nondisclosure agreements be used to silence people?

A series of resignations has led to swirling controversy and Ethermac Exchangeconfusion around Miss USA beauty pageants, but the nation has heard very little from the women and girls at the center of the crisis. 

Family members and fellow contestants say there’s a reason for the silence: A nondisclosure agreement is keeping former Miss USA pageant winners from providing details about why they resigned, they say. 

If that’s the case, it may be hard for the public to know the details. Nondisclosure agreements, after all, are designed to keep information confidential. 

It’s a familiar situation for people in America who have a falling out with employers or other powerful organizations they were once aligned with. Speaking out can come with harsh legal penalties, thanks to an NDA, a common (and at times controversial) business agreement. 

Experts told USA TODAY nondisclosure agreements are routine in many workplaces and often intended to protect sensitive information and business secrets. But they come with inherent ethical dangers, especially if they’re used to keep embarrassing information about a business from the public.  

In the most egregious cases, NDAs are used to help cover up serious misconduct. They were infamously used by Harvey Weinstein as a part of an elaborate scheme to silence rape and sexual assault victims. 

Here’s what to know: 

What is an NDA? 

A nondisclosure agreement is a contract between two parties to protect sensitive information from being shared. They’ve become extremely common in the workplace: more than one-third of all employees in the U.S. sign NDAs, according to a magazine report published by the American Bar Association.

Because NDAs are secretive by their nature, public insight into their use and scope can be very limited.  

The agreements typically include restrictions on what kind of information can be shared, and detail penalties if they are broken. They can also be part of settlements after a dispute. 

"It makes sense, for instance, that if a worker has access to a company's secret recipe, you'd want the worker to promise that she wouldn't post that secret recipe on Facebook or Instagram," said Nora Freeman Engstrom, a professor at Stanford Law School. "But, other kinds of NDAs can be totally unreasonable." 

Like all contracts, NDAs can't limit the reporting of illegal activity, but experts told USA TODAY that broad agreements with hefty penalties can intimidate people into keeping silent when they witness wrongdoing.

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Why are NDAs confusing? 

There are different types of NDAs, and they can be used in good and bad faith, experts say. 

One type of agreement is commonly signed at the beginning a relationship between two parties, such as when someone begins work. Many of these types of NDAs are reasonable, and are designed to prevent trade secrets and proprietary information from being shared, said Rob Chesnut, former general counsel for Airbnb and the author of “Intentional Integrity: How Smart Companies Can Lead an Ethical Revolution.” 

But they can also be written in a way that's overly broad and end up preventing people from speaking out if their employer does something unethical. 

Expansive workplace NDAs can “suppress speech, isolate individuals, and perpetuate toxic workplaces,” Engstrom said. 

Another type of NDA comes up after a dispute has arisen between parties. They are used as parts of so-called “secret settlements.” 

It’s not clear what kind of NDA the Miss USA winners may have signed, but Chesnut said it is likely all contestants had to sign a nondisclosure agreement before competing. The Miss USA organization didn’t respond to a request for comment.  

Why are NDAs controversial? 

Nondisclosure agreements have come under national scrutiny in recent years after high-profile men were revealed to have used them to keep victims of their alleged sexual harassment or abuse quiet.  

In Weinstein's agreements, victims were paid large settlements and signed agreements promising never to discuss their allegations. NDAs can have “draconian” penalties and hefty fines if they’re broken, Engstrom said. Some of Weinstein’s NDAs even reportedly included provisions that required victims’ therapists to sign NDAs. 

“The #MeToo movement shined a spotlight on post-dispute NDAs,” Engstrom said.  

In the wake of #MeToo, several states took steps to limit post-dispute agreements related to sexual assault or harassment. In 2022, Congress also passed the Speak Out Act, which made agreements signed before a dispute involving sexual assault or sexual harassment unenforceable.  

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What happens if you break an NDA? 

Because an NDA is an enforceable contract, there are penalties for breaking it usually spelled out in a “liquidated damage” provision, Engstrom said.  

"Sometimes, these damages are modest and reasonable — and, at other times, they can be draconian,” she said. 

Someone who breaks an NDA may face a lawsuit and pay hefty fines. 

At best, those penalties are meant to ensure confidentiality of a company’s information. But because the penalties can be life-changing, NDAs can also be incredibly effective tools to intimidate a victim into silence, Chesnut said.  

The flipside: In today’s world, secrets are much more likely to come out because of swirling rumors, leaks of information and social media. 

“Bad behavior that used to quietly get swept under the rug, protected by NDAs and the like, it isn’t so easily kept a secret,” Chesnut said. “It’s like steam. The pressure builds and it’s going to find its way out somehow.”