Indecent Disclosure – the end of the line for gagging clauses?

Last week, the UK Government announced a plan for new laws to tackle misuse of non-disclosure agreements (known as NDAs), including those being used to cover up sexual harassment, racial discrimination and assault.

“NDA” is a catch-all term in an agreement that includes confidentiality clauses. They are often used in employment and commercial contracts for a range of purposes including protecting intellectual property, trade secrets or other confidential information such as sensitive or customer details.

There has been criticism of their use in sexual harassment or other discrimination cases, with concerns that they may be used to conceal improper, discriminatory or even illegal behaviour, and impede reporting to the relevant authorities. Currently, provisions in agreements which seek to limit a person’s ability to make certain disclosures about wrong-doing which are in the public interest (often known as “whistleblowing”) are void and unenforceable.

Last year, Harvey Weinstein’s former assistant, Zelda Perkins, spoke out about an NDA to the Women and Equalities Committee, explaining that she agreed to terms which prevented her from disclosing her experiences whilst working at Miramax Films. It was reported that the agreement included that she was to use her “best endeavours” to limit what she said in any criminal case against Weinstein. Perkins, who worked for Weinstein’s Miramax Films in the UK in the 1990s, said she was also banned from talking to a doctor about the events unless the doctor also signed an NDA.

Many will think that the planned changes in law don’t go far enough. In 2017, in its response to its survey “Turning the Tables” on sexual harassment at work, the Equality and Human Rights Commission recommended that: any clauses contractually suppressing individuals from reporting or talking about sexual harassment, both past and future, should be made void; that in the event that such an agreement is used, the employee’s legal fees for reviewing such should be paid by the employer; that best practice guidance should allow for individuals to be accompanied by a colleague or union representative at any such discussion related to an NDA; and that they should be given a reasonable amount of time to consider it.

In June 2019, having heard evidence, the Women and Equalities Committee reported on the use of NDAs in discrimination cases. Its key recommendations were that Government should:

  • ensure that NDAs can’t prevent legitimate discussion of allegations of unlawful discrimination or harassment, and stop their use to cover up allegations of unlawful discrimination, while still protecting the rights of victims to be able to make the choice to move on with their lives;
  • require standard, plain English confidentiality, non-derogatory and similar clauses where these are used in settlement agreements, and ensure that the clauses were suitably specific about what information can and cannot be shared and with whom;
  • strengthen corporate governance requirements to require employers to meet their responsibilities to protect those they employ from discrimination and harassment; and
  • require named senior managers at board level or similar to oversee anti-discrimination and harassment policies and procedures and the use of NDAs in discrimination and harassment cases.

The Committee also renewed previous calls for the Government to place a mandatory duty on employers to protect workers from harassment and victimisation in the workplace, and urgently improve the remedies that can be awarded by employment tribunals as well as the costs regime.

The new laws announced last week do not go as far as the recommendations. They will prevent NDAs being used to prevent individuals from disclosing information to the police, regulated health and care professionals, or legal professionals, such as a doctor, lawyer, or social worker. They will also require employers to make the limitations of such an NDA clause clear within an agreement so the individuals fully understand their rights and what they are signing. It is planned that, for the clause to be enforceable, individuals signing them will need independent legal advice on the limitations of a confidentiality clause, and what can still be disclosed to police, regulated health and care professionals, or legal professionals regardless of an NDA. It is also planned to introduce new measures so that confidentiality clauses that do not comply with legal requirements will be unenforceable. There is no timetable yet for the new laws to be implemented.

In England, the Solicitors Regulation Authority has issued a warning notice to clarify how solicitors’ professional obligations apply when advising on NDAs. The SRA will consider it a breach of the solicitor’s code if NDAs are used to make improper threats of litigation or are aimed at preventing a victim of harassment from reporting the matter to the relevant authorities. The warning notice makes clear that if an employee is not represented, then solicitors acting for the organisation will be responsible for ensuring that no abuse of position or unfair advantage is taken.

In Scotland, the Law Society of Scotland has not gone as far. It has set up a working group which will explore the findings of the commentary of the SRA. Planned new legislation in Scotland in addition to the UK Government’s plans seems unlikely, although it would be possible for guidance for solicitors to be issued.

Is there still a place for NDAs? Yes. They allow parties to move on from a relationship after it has broken down, safe in the knowledge that neither party can discuss the background, or confidential details and sometimes the existence of a settlement. However, they should be used advisedly, and take into account the introduction of the new laws when applicable.

If you have any queries about NDAs, please do not hesitate to contact a member of our specialist Employment team.

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