OpenAI Whistleblowers Urge SEC to Investigate 'Restrictive' NDAs

By Thea Felicity

Jul 14, 2024 11:10 AM EDT

OpenAI Whistleblowers Urge SEC to Investigate 'Restrictive' NDAs — (Photo : PAU BARRENA/AFP via Getty Images)

Visitor look at their phone next to an Open AI's logo during the Mobile World Congress (MWC), the telecom industry's biggest annual gathering, in Barcelona on February 26, 2024. The world's biggest mobile phone fair throws open its doors in Barcelona with the sector looking to artificial intelligence to try and reverse declining sales.

OpenAI whistleblowers have formally requested the U.S. Securities and Exchange Commission (SEC) to investigate what they describe as overly restrictive non-disclosure agreements (NDAs) imposed by the artificial intelligence company.

Reuters obtained a letter from whistleblowers, backed by Senator Chuck Grassley's office, expressing concerns about NDAs that purportedly prevent employees from disclosing information that are considered valuable for regulatory oversight and their own protection.

The complaint contends that OpenAI's NDAs required employees to waive their federal rights to whistleblower compensation, a move perceived by the whistleblowers as stifling transparency and accountability within the company. They have urged the SEC to consider penalizing OpenAI for any agreements found to be improperly "restrictive."

An SEC spokesperson refrained from commenting specifically on the whistleblower submission but affirmed the agency's commitment to evaluating all such complaints according to established procedures.

OpenAI's "Restrictive" Non-Disclosure Agreements

While NDAs are generally permissible and commonly used in business to protect proprietary information, they must adhere to certain legal standards to be enforceable.

NDAs that overly restrict an employee's ability to report unlawful conduct or safety violations to government agencies may be viewed as against public policy, particularly if they undermine transparency and regulatory oversight.

The whistleblowers also criticized OpenAI for allegedly mandating prior approval for employees seeking to disclose information to federal regulators, including disclosures related to potential securities violations. Initially, resistance against said NDA was met with unpaid labor, which was only resolved recently, according to VCPost.

Senator Grassley supported whistleblowers over concerns that OpenAI's policies might discourage employees from reporting wrongdoing or safety concerns, which could potentially break public confidence in the development of artificial intelligence.