Why employers should exercise caution when using NDAs

What is an NDA?

A non-disclosure agreement (NDA), sometimes referred to as “gagging clauses”, are legally binding contracts between one or more parties who agree to not disclose confidential information they have shared with each other. They are most typically contained within employment contacts and settlement agreements.

Why is there controversy surrounding NDAs?

These contracts of silence have recently come under intense scrutiny following the global #MeToo movement where high-profile moguls are battling allegations of sexual assault. Most notably, Harvey Weinstein has been at the centre of dozens of sexual harassment and rape cases which he denies but it has been revealed that he has used several NDAs to prevent the media publicising these accusations. Lately, the #MeToo movement has infiltrated the UK and politicians and businessmen such as Sir Philip Green who is facing accusations of sexual harassment, racial abuse and bullying which he categorically denies. The issue of NDAs is at the forefront of these scandals with Green allegedly paying 7 figure sums to silence employees he alleged treated extremely poorly. Such large sums are paid to prevent cases from being brought into the public eye for fear of bad publicity and ruining one’s “image”. Barristers at 11KBW and Doughty Street Chambers have stated that one risk of using NDAs in silencing victims is that they may fear reporting serious wrongdoing to the police or not comply with relevant law enforcement investigations.

The NHS are particularly concerned that the wording of some of the agreements could be ambiguous and could confuse people who may want to still report whistleblowing and serious wrongdoing so have banned the use of these clauses to ensure matters of public safety are preserved.

Why do they exist?

Traditionally, NDAs were drawn up to keep trade secrets from being publicised from a business standpoint. However, considering the recent #MeToo movement the NDAs can be seen to be used as an unethical mechanism to silence victims and for the employers to retain their positions of power.

What is being done about this?

The House of Commons Women and Equalities Select Committee published a report on sexual harassment in the workplace (https://publications.parliament.uk/pa/cm201719/cmselect/cmwomeq/725/725.pdf) in July 2018 pushing for recommendations for a “clean up of the use of NDAs”. One recommendation was that NDAs should be limited to “government approved” standard clauses and that there should be a professional disciplinary offence for lawyers, and in some circumstances a criminal offence for employers and lawyers when a non-government approved standard clause is utilised.

Maria Miller, the chair of the committee, states she would personally like to see NDAs outlawed in employment severance agreements. This issue is so topical that Labour has even pledged to ban NDAs that prevent employees disclosing discrimination, harassment or victimisation issues. Theresa May agrees “that some employers are using them unethically” when responding to Labour’s Jess Phillips who said “it seems our laws allow rich and powerful men to do what they want as long as they pay to keep it quiet”.

Zelda Perkins, Weinstein’s former personal assistant is urging the UK government to ban the use of non-disclosure agreements in the workplace beyond sexual harassment, extending to issues such as discrimination and race. Perkins was silenced by Allen & Overy who were acting on behalf of Weinstein but later broke the NDA in light of the #MeToo movement. The SRA has faced criticism from MPs for failing to act on Allen & Overy who prevented Perkins from referring matters to the police.  Whilst this was referred to the SRA the regulator decided not to take action.

What could this mean for you as an employer?

Caution should be exercised when drafting NDAs as the law surrounding these agreements is uncertain and under intense scrutiny. Under the proposed recommendations employers and lawyers can be liable for NDAs which deviate from the guidelines.

How we can help?

We can offer independent and confidential advice on Settlement Agreements and NDA’s in an employment contact, for both employers and employees.

Simply email a copy of your settlement agreement (if an employee) to jodie.hill@thrivelaw.co.uk

Or call Jodie on 07555759349 for a no obligation chat about how this could work in your business and to ensure what you are providing you staff by way of a settlement agreement is lawful.

For more information visit our website www.thrivelaw.co.uk and follow us on social media

Twitter and Instagram @iamjodiehill and @thrive_law

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