How confidentiality can lead to cover-ups

Non-disclosure agreements (NDAs) seem to be the latest celebrity ‘must haves’. ‘Strictly Come Dancing judge Craig Revel Horwood recently revealed on daytime TV that he had asked people who work for him, his builder, and even his boyfriend, to sign one.

Until the #MeToo scandals hit the news, those outside of HR and the legal profession might have had only a hazy idea of the purpose of these contracts. But after the sensational naming in Parliament recently of a “leading businessman” in connection with allegations of sexual harassment and bullying in a work setting, there can’t be many of us in the dark over their potential to backfire.

The latest high profile revelation, made under Parliamentary privilege, followed a temporary injunction from the Court of Appeal preventing the Daily Telegraph from publishing allegations of misconduct against the executive, made by five employees. The court decided it was unlikely the newspaper could show that breaching the NDAs and naming the individual in the story was in the public interest, as the employees had all received legal advice before signing them as part of settlement agreements, and there was no indication they had been forced to.

This kind of furore is a far cry from these contracts’ routine purpose in a commercial context, which simply was to protect trade secrets. When used as part of a settlement agreement in terminating employment, NDAs (also known as confidentiality agreements) often contain a ‘non-disparagement’ clause (known as a ‘gagging clause’) which prevents those involved in an employment dispute from making derogatory statements about each other after the dispute’s been settled. But they can also be abused if employers try to link them to the financial settlement accompanying them, in order to persuade employees that the clauses prevent them from reporting misconduct to the relevant authorities.

Earlier this year the Solicitors Regulation Authority issued a warning to law firms that NDAs must not be used to cover up workplace sexual misconduct or prevent whistleblowing, not least in their own industry, where two-thirds of female lawyers have reported being sexually harassed, yet the number of official complaints of sexual misconduct remains low.

The Parliamentary Women and Equalities Committee (WEC) produced a report in the summer on Sexual harassment in the workplace (pdf) which recommended, among other things, ‘cleaning up’ NDAs by requiring them to be written in plain English so they could be easily understood, and accompanied by a clear explanation of what disclosures cannot be prohibited or restricted by them. The committee also proposed widening the whistleblowing laws to include sexual harassment disclosures, and making it an offence both for employers and their lawyers to try to use an NDA to prevent such a disclosure.

This month the WEC is holding an enquiry into the use of NDAs when any form of harassment or discrimination is alleged, including pregnancy, maternity or race discrimination. It is asking whether NDAs should be banned altogether in harassment cases, or what safeguards should be introduced to prevent their misuse, whether employers should be required to disclose their use of NDAs, and what obligations there are on employers to ensure their grievance procedures are fair and thorough. It remains to be seen what evidence the enquiry reveals and what recommendations to government emerge.

Theresa May has already accepted publicly that some employers are using NDAs “unethically” and one newspaper recently reported that ‘government sources’ are expecting to unveil new rules before Christmas. Whether this happens in the current political climate is far from certain, but one thing is clear: NDAs are set to stay under the government spotlight, and in the public consciousness, for the foreseeable future.

by Jill Evans, HR Content

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