Gombos Leyton Blog

FSA Threatens Administrative Action Against Institutions that Use NDAs to Prohibit or Limit Employees from Communicating with The Department of Education

Posted by Dave Obuchowicz on Aug 3, 2023 4:02:24 PM

The Department of Education’s Office of Federal Student Aid (“FSA”) recently published a new enforcement bulletin, prohibiting postsecondary institutions from using certain nondisclosure agreements (“NDAs”) to prevent employees from speaking with Department officials. The new guidance explains that the Program Participation Agreement (“PPA”) requires institutions and their third-party servicers to cooperate with the Department in audits, investigations, program reviews, or other reviews authorized by law. Such cooperation includes “providing reasonable access to personnel associated with the institution’s or servicer’s administration of Title IV, HEA Programs.” 34 CFR 668.24(f). This means, according to FSA, that institutions cannot use NDAs to limit an employee’s ability to communicate with the Department about any matter related to the administration of Title IV Programs. FSA defines “NDA” broadly to include confidentiality clauses, non-disparagement clauses, or any other language that may be included in employment contracts, settlement agreements, separation and release agreements, or standalone NDAs.

The bulletin notifies institutions that they are responsible for ensuring that their NDAs “make clear” that current and former employees are legally able to communicate with the Department. FSA also suggests that traditional NDA provisions, such as whistleblower exceptions or carve outs for communications to governmental agencies about potential violations, do not sufficiently allow the Department “reasonable access to personnel.” FSA’s position is that the PPA and Department regulations broadly permit employees to speak with the Department about any subject associated with the administration of Title IV programs, even if the communications do not involve violations. Institutions deemed to restrict such communications could face administrative action.

Institutions that use NDAs in any capacity should promptly review them to make sure they do not impermissibly restrict employee communication with the Department. Moreover, institutions should check with their third-party servicers to see if they use similar NDA agreements. If so, those too must be adapted to comply with FSA’s new guidance.

The Department’s rapid expansion of its investigatory and law enforcement functions continues to increase the potential for administrative action against postsecondary schools. At Gombos Leyton, our attorneys have substantial experience helping institutions mitigate those threats, including drafting NDAs, employment contracts, separation and release agreements, and settlements with an eye towards compliance with Department of Education requirements.

Contact David Obuchowicz (dobuchowicz@glpclaw.com) or Steve Chema (stchema@glpclaw.com) with any questions about using NDAs at postsecondary schools.  


Topics: "Compliance", Career Education, "Higher Education", Regulations, Title IV

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