ABSTRACT
We examine whether state laws restricting employers’ use of non-disclosure agreements (NDAs) improve labor-market efficiency. Employers use NDAs to suppress negative workplace information to appear more attractive to job seekers. However, widespread suppression degrades the labor-market information environment, potentially creating a market failure that disincentivizes workplace improvements and worsens firms’ recruiting outcomes. Using a staggered difference-in-differences design around the enactment of state NDA restriction laws, we find that firms fill job vacancies more quickly, workplace conditions improve, employee turnover declines, and firm performance improves. These results indicate that restricting firms’ ability to suppress workplace information improves labor-market efficiency and helps correct a market failure created by widespread NDA use. Our findings extend the accounting literature on labor-market information frictions by suggesting that firms’ strategic suppression of employee disclosures can create market externalities with real consequences for workers and firms.
deHaan, Ed and Wang, Tao and Zhou, Frank and Zhou, Yuqing, Non-Disclosure Agreements and the Market for Talent (September 28, 2026).
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