Rachel Penny: Employees should benefit from increased transparency over NDAs

Rachel Penny
Rachel Penny

Rachel Penny, employment partner at Carson McDowell, considers the use of non-disclosure agreements (NDAs) to cover up wrongdoing in the workplace.

Headlines were made towards the end of last year when the former Northern Ireland secretary Lord Hain used parliamentary privilege to name retail tycoon Sir Philip Green as the businessman behind an injunction preventing the publication of allegations of misconduct.

The paper had been blocked from reporting allegations from a former female executive about Sir Philip’s alleged conduct towards her because she had signed a non-disclosure agreement (an NDA) as part of a reported £1m settlement when she left the company. That injunction has now been lifted.

At that point, the Labour peer called for new legislation that prevented the “twisting” of NDAs and the government responded by announcing a public consultation on new measures to protect employees and workers from misuse of these NDAs.

Following on from the #MeToo campaign, which gained significant traction last year, greater focus has been placed on the use of confidentiality, gagging and NDA provisions in employment settlement and compromise agreements. These provisions are very commonly used when employers and employees agree to part ways and settle their differences on confidential terms.

Often, their use is entirely appropriate, such as when the non-disclosure relates to commercially sensitive information that is crucial to a business. But there has been greater scrutiny in the last 12 to 18 months on whether they are being misused in an attempt to cover up serial wrongdoing, such as allegations of serious sexual and/or racial harassment.

In both the UK and the US there have been a raft of allegations, mostly from women, about the behaviour of high-profile figures in the film industry, media, politics, sport and business, most notably perhaps the Hollywood film producer Harvey Weinstein.

It has emerged in many of the cases, most often when the complainant was a former employee of the person at the centre of the allegations, that NDAs were signed as part of the settlement payments made to ensure their silence. High profile figures are well aware of the damage the reporting of any such behaviour, or alleged behaviour, can do to their reputations and careers, so it is no surprise they wish to stop it being discussed publicly.

Since the introduction of whistleblowing legislation in 1998, it has been the case that any attempt to gag a person from making a “protected disclosure” is void. But whistleblowing legislation is notoriously complicated and this has left many complainants uncertain of precisely what they can and cannot discuss about serious allegations which, in some instances, may amount to a criminal offence.

The #MeToo movement has led to greater scrutiny of NDAs by the Westminster government and parliamentary committees because in some highly publicised cases there is a belief that alleged sexual misconduct may have been uncovered sooner had the complainants been permitted to discuss their allegations.

In turn this has led to legal regulators in England and Wales to issue updated guidance to solicitors on boundaries of appropriate use of NDAs. The government consultation does not extend to Northern Ireland, but nevertheless we are likely to see a change in use of NDAs to put beyond all doubt that any clause that seeks to prevent the reporting of any criminal or regulatory offence is legally unenforceable. Throughout all of this, if solicitors are involved, they need to balance their professional duties to act in the best interests of their clients against their duty to uphold the rule of law, the interests of justice and maintain public confidence in the profession.

Similar moves to restrict the use of nondisclosure agreements have been introduced in US states including California and New York, with California also signing into law a bill that bans nondisclosure provisions in settlements involving claims of sexual assault, harassment or discrimination based on sex.

NDAs never prevented people in the UK from going to the police to report criminal offences, but the increased clarity provided by the government is to be welcomed if it helps to remove the “fear factor” that reporting allegations of (for example) sexual assault has ramifications for or could unwind the settlement previously agreed. There is some way to go before we know exactly what the government will do, but at least we are having a serious conversation about how best to handle these very difficult issues.

  • Rachel Penny is a partner in the employment team at Carson McDowell. View her profile here.

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