Whistleblowers Request SEC Investigation into OpenAI's Non-Disclosure Agreements

Whistleblowers urged the SEC to initiate an investigation into OpenAI's non-disclosure agreements ("NDAs"), which allegedly violated whistleblower protection laws by imposing illegally restrictive conditions.

In a letter to SEC Chair Gary Gensler, "one or more anonymous and confidential" whistleblowers who had previously filed a TCR complaint with the SEC, emphasized the need for SEC enforcement to protect employees' rights to report concerns without fear of retaliation. The whistleblowers seek to ensure that all NDAs are compliant with legal standards and that OpenAI takes corrective action consistent with SEC precedents to reinforce the rights of employees and investors in the AI sector.

Specifically, the whistleblowers alleged that OpenAI's employment, severance, non-disparagement and non-disclosure agreements violated SEA Rule 21F-17(a) ("Staff communications with individuals reporting possible securities law violations"), which prohibits any action to impede an individual from communicating with Commission staff about possible securities law violations. The whistleblowers said that there is an urgent need to ensure that employees working on AI technology understand that they can raise complaints or address concerns to federal regulatory or law enforcement authorities and that it is "critical" for companies to understand the illegal nature of their non-disclosure agreements.

The whistleblowers alleged that the NDAs unlawfully:

• contain non-disparagement clauses that fail to exempt disclosures of securities violations to the SEC;
• require prior consent from the company to disclose confidential information to federal authorities;
• impose confidentially requirements with respect to agreements that themselves contain securities violations; and
• require employees to waive compensation that was intended by Congress to incentivize reporting and provide financial relief to whistleblowers.

The whistleblowers urged the SEC to "take swift and aggressive steps" to: 

• require OpenAI to produce for inspection every employment agreement, severance agreement, investor agreement, or any other contract that contains a nondisclosure agreement;
• require OpenAI to notify all past and current employees as to the violations committed;
• fine OpenAI for each violation under the Securities and Exchange Act; and
• direct OpenAI to cure the "chilling effect" of its past practices.