Injunctions, #MeToo, and changes to the law: the problems with NDAs
Non-Disclosure Agreements (commonly referred to as NDAs) have come under increased scrutiny of late, thanks, in part, to the #MeToo movement exposing a prevalent culture of harassment in the workplace. This began with the infamous Harvey Weinstein scandal after disclosures by British producer Zelda Perkins were made in 2017. Ever since, there has been a growing concern as to how NDAs are used, a renewed spotlight placed on industries and the legal profession, as well questions as to whether NDAs have a place in the business and legal world for settling disputes involving misconduct and sexual harassment at all anymore. Recent announcements, however, show some hope that positive change is coming in the form of clearer law and guidelines which may assist those faced with choosing whether to sign such agreements, as well as imposing restrictions on those drafting them.
What is an NDA?
NDAs, or Non-Disclosure Agreements (also known as “gagging orders”) are essentially contracts between employees and companies, sometimes even forming part of employment contracts themselves. Typically, NDAs function as ‘confidentiality clauses’, preventing staff or ex-staff divulging sensitive information to the public or other businesses. Such sensitive information can include details of inventions, designs or ideas, but also has scope to include anything that might harm the reputation of an organisation. Put into context, a basic NDA may be given to an employee as part of a compromise agreement where said employee is leaving under tense circumstances, restricting them from disclosing the reason for, perhaps, a termination. Another example of an NDA might be included in the initial contract of employment an employee signs upon joining a company, preventing disclosure of trade secrets.
Seen from this simplistic angle, there is an argument that NDAs are necessary to protect innovation and competition; however, as the last few years have sadly shown, they are also used to prevent employees divulging allegations of abuse, misbehavior and harassment post-settlement.
Contrary to some belief, NDAs cannot stop people reporting alleged illegal acts, but may cover allegations of staff bullying, or inappropriate comments made by an employer, unless it relates to a protected characteristic under employment law. It is difficult to say how common NDAs are in the UK, but many settlement agreements contain them, preventing employees from speaking about certain matters.
As their nature is contractual, a breached NDA leaves that person at risk of being sued, likely for damages; however, if an organisation is under the belief that an NDA is about to be breached, it can file for an injunction. Such injunctions are their own proverbial can of worms and have suffered from criticism since 2011. The case of Sir Philip Green, owner of Topshop, is an example of this, with him facing allegations of sexual harassment and racist behaviour in the workplace. Such an injunction was raised, but neatly side-stepped by parliamentary privilege, one of the only ways in which injunctions like these may be overcome at the moment.
NDAs are also used by individuals and even official organizations, like [the SAS].
What Place do NDAs Have?
For those recipients of misconduct, options include criminal or civil proceedings or a tribunal claim through employment law. These processes can be time-consuming, costly and unpleasant for claimants, making a confidential settlement through NDA more appealing. This same conclusion is echoed by the Women and Equalities Committee, who state:
“there may be times when a victim makes the judgement that signing an NDA is genuinely in their own best interests, perhaps because it provides a route to resolution that they feel would entail less trauma than going to court, or because they value the guarantee of privacy”.
With the advent of social media, avoiding a trial by public opinion, as well as having to prove one’s innocence or claim in court, is a clear concern from both parties to such allegations. In an ideal world, NDAs can protect the reputation of organisations in which a single incident has occurred, allowing for staff members to be disciplined accordingly and the victim to be thoroughly supported. This is, of course, somewhat idealistic, especially in light of the #MeToo movement’s revelations and increasing exposure to a culture of abuse. It therefore seems that NDAs certainly have a place in the modern legal and business world, but this can only be maintained where limitations are made clear and standards of ethics maintained.
Problems with NDAs and the Role of the #MeToo Movement:
As stated above, it is when NDAs are misused to hide abuse, contain draconian measures and aim to mislead those who may opt into such agreements, that problems clearly arise. This is most clearly highlighted with the Harvey Weinstein scandal, after Zelda Perkins came forward. As shown as part of the written submission from Ms Perkins to the Select Committee Inquiry on Sexual Harassment in the Workplace in 2018, the NDA contained clauses prohibiting disclosure even to medical practitioners without said practitioners first signing their own confidentiality agreements. Further to this, Ms Perkins made clear in evidence given to the Women and Equalities Committee that she was misled into believing she could not speak of her allegations to anyone without first gaining permission from Weinstein and his representation. While the terms of this particular NDA have been widely condemned as restrictive and harsh, it is the latter point that forms a more worrying portent for the future of such agreements; further clarity is clearly needed to inform those who have the choice to settle disputes via Non-Disclosure agreements.
It seems that the #MeToo movement has likely provided the background impetus, finally, for action on this front, however. Alongside reports from bodies such as House of Commons Women and Equalities Committee, the Law Society has agreed to review its controversial practice note on NDAs, which was described as “disappointing” and showing “no ethical leadership” by Professor Richard Moorhead. The recent report on the use of NDAs in discrimination cases states:
“Our Report shows unequivocally that in many cases signing a non-disclosure agreement is not benign. And we challenge the Government to act to change this now. The most shocking evidence given to our inquiry has been the detrimental effect an NDA can have on the lives of ordinary people. We received evidence from those who, after signing an NDA found it difficult to work in the same sector again.”
The 2018 report also credits the #MeToo movement itself in raising awareness among legal practitioners concerning the use of NDAs in dispute settlement, thus clearly showing the impact it has had in changing perceptions and forcing the hand of Parliament to take action. In the middle of July 2019, in fact, new legislation has been announced to tackle NDA misuse.
What is Planned?
The government’s planned changes will prohibit firms from using Non-Disclosure Agreements from disclosing information to the police, medical practitioners and lawyers. While the current legislation surrounding NDAs already allows those who sign them to report wrongdoing, it is posited that these changes will make this more evident and available. The limitations of such agreements will also be required to be made clear “in plain English” to the employee. This is clearly in response to the concerns surrounding clarity and options available to those in dispute settlement. The Department for Business, Energy and Industrial Strategy (DBEIS) is also working on new guidance on NDAs with the Equality and Human Rights Commission and the SRA. This DBEIS involvement is heartening, especially as they provided response to the Government Consultation on confidentiality clauses earlier this year.
Rebecca Hilsenrath, Chief Executive of the of the Equality & Human Rights Commission, has said:
“The use of NDAs is only part of the problem of workplace harassment and discrimination, and employers must step up to protect their employees from this appalling behaviour before it happens.”
“Harassment and discrimination should never go unanswered and unchallenged just because victims are prevented from speaking out. This new legislation will help to end ambiguity about employees’ rights and stop the misuse of NDAs to protect corporate and personal reputations and obstruct justice.”
At this stage, however, little is still known about the exact wording of the new legislation proposed thus far and the timeframe in which this will be enacted remains uncertain. The change in Prime Minister on 24th July 2019 and the continued focus on Brexit will likely mean that we are still someway off the much-needed proactive change that this legislation will bring, but its seeming inevitability can only be seen as welcomed.
From these updates, the impact of the #MeToo movement and subsequent bodies’ pressure has had on prompting change to NDAs. It is clear that when properly administered and regulated, NDAs have a necessary place in the business arena, but further scrutiny and actual legislative action is needed before we can come to the table on an even playing field with regard to these agreements. Much can also still change, especially with the taking over of Theresa May’s mantle by Boris Johnson and Brexit, as ever, presents an obstacle that likely needs overcoming before the much-needed change as to NDAs can be enacted. Further to this, we must not lose sight of the conduct behind these NDAs, as well as the silencing of it; the more systemic issues of oppression have become even more apparent in light of NDA-related scandals. There is much still to be done.
Let us know your thoughts on the announced changes to the law on NDAs in the comments below. How do you think the recent political upheaval will affect these? We will provide further updates as more is revealed as to the contents of these legislative changes.