Non-Disclosure Agreements: A Question of Abuse?

Posted on 26 October 2018 by Michael Frost

Non-Disclosure Agreements: A Question of Abuse?

Parliamentary privilege was first enshrined in law in the 1689 Bill of Rights to provide immunity to the Members of the House of Commons and House of Lords so that Parliamentarians can carry out their official public duties free from interference. On Thursday afternoon, Lord Hain invoked that cloak to expose Sir Philip Green as ABC, the business executive who obtained an injunction preventing The Telegraph publishing allegations of serious sexual harassment, racist abuse and bullying. In doing so, he claimed that his disclosures were made in the public interest in exposing those in "powerful business using NDAs and substantial payments to conceal the truth".

This disclosure exposes the disconnect between the moral panic regarding NDAs as de-facto oppressive muzzles silencing legitimate complaints, and the rule of law as articulated in the Court of Appeal's reasoned judgment regarding the utility and enforceability of NDAs when drafted properly and entered into without improper pressure. Lord Hain's reference to revealing truth further overlooks both the Court of Appeal's finding that it had no "corroborating evidence" to support the allegations and Sir Philip's consistent denials of them.

Lord Hain's rush to judgment appears to proceed on the default presumption that the existence of an NDA denotes wrongdoing or criminality – irrespective of whether the underlying allegations are proven. At best this is disingenuous. At worst it places an unelected peer and his own judgment over that of the Court of Appeal, which was tasked with applying a legal public interest test with the full benefit of judicial experience, legal submissions and evidence.

As we outlined in NDAs: Ethics & Enforceability in August 2018, the use of NDAs has rightly been a matter of national and legal debate since the Harvey Weinsten scandal and the #MeToo global movement found that UK employers were using NDAs to silence victims of sexual harassment. Mr Weinstein's NDA with his former executive assistant, Zelda Perkins, restricted her from disclosing allegations of alleged sexual assault and attempted rape with her lawyer, doctor, family or friends without them first entering into separate NDAs. She has spoken out about feeling that that she would be imprisoned if she breached the NDA.

The public debate surrounding Mr Weinstein's abuse of NDAs resulted in a report published by the Parliamentary Women and Equalities Committee. It made recommendations for the reform of the use of NDAs, including the use of standard approved confidentiality clauses written in plain English, which clearly state their purpose and effect. There are also calls for the bodies governing the legal profession, the Solicitors Regulation Authority and the Bar Standards Board, to impose sanctions to lawyers who misuse NDAs. There is no debate that any contract, NDA or otherwise, which seeks to prevent legitimate disclosures of certain information, including in relation to professional misconduct – such as sexual harassment towards employees or clients – or information protected by law is likely to be unenforceable.

It was against this cultural and legal backdrop that the Court of Appeal - presided by three of the most senior judges in the land - evaluated the competing rights of The Telegraph's freedom of expression and Sir Philip's and the alleged victims' right to confidentiality. In doing so, the Court of Appeal noted the public importance in the informed debate of the standards of conduct of people in positions of power, and that the media should be able to report on cases which raise questions as to what should or should not be a standard in public life. As regards the NDAs themselves, the Court of Appeal found that they had precisely the characteristics lacking from those deployed by Mr Weinstein. It found that they were entered into "without improper pressure or any other vitiating factor, and with the benefit (where appropriate) of independent legal advice, and (again, where appropriate) with due allowance for disclosure of any wrongdoing to the police or appropriate regulatory or statutory body". In awarding the injunction, the Court of Appeal simultaneously endorsed the use of NDAs whilst implicitly recognising those characteristics which would have made them fall foul of the law. It does not appear that Lord Hain read the Court of Appeal's judgment in detail.

Lord Hain's disclosure has now been reported by the worldwide media and has far-reaching consequences. Both Sir Philip Green and his alleged victims are now deprived of the opportunity to clear their names by having the allegations determined by a public court. In the event that the underlying allegations of abuse and harassment are true, the complainants, some of whom specifically objected to The Telegraph's attempts to publish the confidential information, are now forced to relive their traumatic experiences on the global stage. This does not benefit the victims and it remains to be seen what effect Lord Hain's disclosure will have on other complainants wishing to settle their grievances confidentially.

We are in urgent need of joined-up thinking between the judiciary and public opinion on the purpose and enforceability of NDAs. It is hoped that Theresa May's "imminent" announcement on NDA reform will move this discussion forward. In the meantime, those considering NDAs should take comfort in noting that NDAs remain an effective and important contractual tool to settle disputes at an early stage, and that an NDA clearly setting out the parties obligations, expressly recognising that it does not prohibit legitimate disclosures, including the reporting of sexual harassment to the proper authorities, and is entered into with the benefit of legal advice, should remain enforceable.

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