Non-disclosure agreements (NDAs) have increasingly been part of the media agenda with many high-profile cases making recent headlines. Contributor James Townsend, Partner and Head of Employment Law – Michelmores.
A number of complaints have surfaced over the years which suggest NDAs often work to the disadvantage of the claimant, whereby a financial settlement from a wealthy business combined with an NDA is used as a ‘hush’ tactic to prevent an individual from speaking out about a crime. Notable cases have been seen with the likes of Sir Philip Green and Harvey Weinstein where both businessmen used NDAs and financial pay-offs to keep their identities concealed following allegations of sexual harassment. In a bid to refine the use of NDAs and ensure they are used ethically, the government has reviewed the regulation and suggested new legal measures to protect workers from misuse.
NDAs in practice
NDAs in settlement agreements are designed to prevent a claimant from agreeing a settlement and then disclosing the background information of the claim and details of the settlement to third parties, such as the media. As the law stands, an NDA does not in itself prevent a victim from reporting a crime to the police. It simply prevents it, theoretically, from being interpreted publicly by outlets such as the media. The idea behind this is that it should protect those on both sides of the claim from any unfair reputational damage.
What has sparked change?
A number of organisations, groups and individuals have spoken out for the improved use of NDAs. In 2018, reports of wealthy employers using NDAs to silence victims of sexual abuse led the House of Commons Women and Equalities Committee to conduct an enquiry into sexual harassment in the workplace. The report that followed called for better control and regulation of NDAs to prevent further cases of misconduct with the onus on Parliament to start legislating fast. Momentum movements, such as #metoo have proven a successful catalyst to this and last month, the government announced proposed changes.
The new terms
In its latest statement, the government vowed to clarify the existing law, consolidating the fact that all employees have the right to go to the police regarding a crime regardless of an NDA, as well as creating new rights to enable individuals to talk to therapists or doctors about matters that are subject to NDAs. Furthermore, the government is proposing that for an NDA to be enforceable the subject of the NDA must have received independent professional legal advice from a solicitor before entering into it.
Will the changes be effective?
When used ethically, NDAs are a useful tool in settling disputes between parties. They can act to protect businesses from suffering unjustified reputational damage when faced with spurious unfounded complaints brought by disgruntled ex-employees. When it comes to regulating NDAs however, there are a number of views as to what the best method is. One particular thinking is that over regulating or limiting the enforceability of NDAs in settlement agreements could ultimately be to the disadvantage of claimants (as opposed to wealthy business men and/or employers) as this would reduce the incentive for such respondents to settle cases. At present, we haven’t seen anything change drastically, but there is a continued discussion around further legislation for NDAs and the potential outcomes from over regulating should be considered carefully.
In my opinion, the government’s current proposals do little to change the status quo. If parliament truly wants to level the playing field it would be better looking to grant anonymity to claimants and respondents (unless they expressly wish to waive such right) when considering complaints of sexual harassment and /or racism in the workplace before an Employment Tribunal, rather than openly publishing judgments on the internet. This would improve a claimant’s confidence in pursuing legal action in the instance of a crime and increase the likelihood that those guilty are truly held accountable for their actions in an appropriate forum.
Limiting the opportunities wealthy businesses currently have to offer a financial pay-out and side step a criminal prosecution should be the ultimate goal of the government. Those who have fallen victim to racism or sexual harassment in the workplace should have the full support of the legal system and all employees, whether victim or not, should be aware of structures in place to help them in the event of a crime in their workplace. The fact that NDAs are on the government’s agenda is of course a good thing, but we hope to see greater improvements in time which carefully consider the outcomes for both individuals and businesses.