Schafer: Maybe these NDAs really protect only the bad employers

Even careful managers and bosses, the ones who check references and conduct probing interviews, will never know as much as about a job candidate as that person does.

It's a version of the asymmetric information problem, which crops up all the time when people buy or sell things. One side of a deal just knows a whole lot more than the other.

What's not nearly as well understood in the job market is that job-seekers have tough information problems, too. The labor economist Aaron Sojourner of the University of Minnesota's Carlson School of Management has long focused on these kinds of problems.

His most recent research paper, just out, focused on a narrow question of loosening the rules around employee nondisclosure agreements. With his two co-authors, he explained how this information problem costs workers a lot. And you have to wonder if these NDAs really only benefit bad employers.

The problem of workers haven't gotten nearly the attention that's been paid to the boss's information problem, Sojourner said.

The stakes are really high, too, Sojourner said. Making an unlucky job change is not like choosing a bad restaurant for lunch, over in an hour. A job is the biggest economic factor in the lives of most people, paying the bills and providing benefits such as employer-subsidized health insurance.

Workers afraid of the unknown will even put off looking for a new job, no matter how ready they are for a new assignment or eager for higher pay.

Sojourner and his research partners, Jason Sockin of the University of Pennsylvania and Evan Starr of the University of Maryland, turned their attention to online reviews in the labor market because of how common online reviewing has become across our economy. They used Glassdoor in their latest study, as Sockin had worked there for a time and knew the data well.

Jobs are experiences and not products, Sockin explained in an interview last week with Sojourner. Workers are only really going to understand what the new job could be like by hearing from some other person who's worked a similar job at that company.

When they looked at Glassdoor, it was perfectly clear that job-seekers really wanted to see the bad reviews. This might be their only source of this kind of information.

Then they turned their attention to nondisclosure agreements, or NDAs, required by most employers for at least some of their employees.

Employers do have good reason to want to keep trade secrets from being walked out the door. The problem, though, is that these nondisclosure provisions are often broader than that.

Sojourner and his co-authors illustrated this point by quoting from the NDAs once used by the Weinstein Co. of the entertainment industry, brought to light during in the #MeToo reckoning of sexual harassment and abuse.

This agreement required employees at Harvey Weinstein's company to never disclose anything related to "the personal, social, or business activities of the Company, the Co-Chairmen, or the executives, principals, officers, directors, agents [and] employees."

Personal? Social?

In the wake of the #MeToo movement, three state legislatures — Minnesota's wasn't one of them — decided these broad NDAs needed to be narrowed, as it was obviously wrong to let employers use them to conceal unlawful behavior.

That gave these economists a chance to see if the tone and substance of what people put on Glassdoor changed in those three states.

Sojourner said he was confident that NDAs really do keep information out of the labor market, but he wasn't expecting to see much of a difference in postings right away. It didn't seem likely many employees would have even heard of their state's new rule on NDAs or understood it might apply to them.

The researchers actually saw a pretty big difference. Workers posted more negative employer reviews in these states and felt more comfortable giving identifying information about themselves, such as job titles. Reviews with information on bullying and harassment also jumped 22%.

They also saw bigger differences emerge between employer ratings, with a gap opening up between what Sojourner and Sockin called "high-road employers" that try to operate a fair and safe workplace and those with apparently less interest in doing that.

That means the good employers in the job market bear a cost of these NDAs, too, Sojourner said, not just the workers.

"They allow the low-road firms to mask themselves, and to appear similar to the high-road employers," he said. "These NDAs and nondisparagement clauses, it might make sense for the two parties at the table to agree to them, but it only does so because they're ignoring the stakes many other parties have in it."

This is another chronic problem studied by economists, when somebody else gets stuck with some of the costs when they are not even a party to the deal. Pollution is a commonly cited example of this, affecting people unlucky enough to be downriver of the polluter.

It's easy to imagine employers complaining that these online services attract grumblers and even well-managed and ethical businesses could have one. It's the same challenge as restaurant operators who must monitor Yelp and Google reviews or cabin owners who have to watch for a vacationer who decided to blast their lake place on Vrbo.

But imagine being asked, before clicking the reservation button for a lake cabin, that booking any place that's been listed there also means you'd promise to never share any critical information about it.

You'd have questions. Like, what don't they want me to tell others about? And, is this why we can't see any meaningful reviews on this site?

And, can't the market for something as expensive as a week-long vacation rental work any better?