Non-Disclosure Agreements: Ethics and Enforceability

Posted on 03 August 2018

Non-Disclosure Agreements: Ethics and Enforceability

Recent media and parliamentary scrutiny has brought the utility and enforceability of Non-Disclosure Agreements (NDAs) into sharp focus. Recently, a parliamentary inquiry prompted by the Harvey Weinsten scandal and the #MeToo global movement found that UK employers were using NDAs, or confidentiality clauses in settlement agreements, to silence victims of sexual harassment.  The report, published by the Parliamentary Women and Equalities Committee's (WEC), criticised businesses, the government and regulators for failing adequately to tackle sexual harassment in the workplace.

The findings are a timely spur to the government, employers and lawyers to make sure that NDAs are used for their proper purpose, namely the protection of private information, and not abused to silence victims and cover up misconduct.

NDAs/Enforceability

NDAs are an important legal tool used by businesses and individuals to prevent the disclosure of private and/or confidential information. They are contractual agreements to share confidential information, and to keep that information confidential for a specified time.

NDAs are of particular importance in the context of employment relationships between high-profile individuals and their staff – such as nannies and personal assistants – who, in the course of their employment, routinely learn sensitive information about their employer's private and family life. Whilst private information is generally protected under European and UK human rights law, NDAs play a key role in formalising the scope of the relationship and the use of information obtained in relation to it, as well as creating a mutual bond of trust.

As with any contractual agreement, NDAs are legally enforceable, and a party can claim damages in the event of a breach. It is also possible to obtain injunctive relief to prevent an anticipated or threatened breach, although this is more difficult where some or all of the information is already in the public domain, or where there is a legitimate public interest in its disclosure. Attempts to enforce an NDA can also be defeated by demonstrating that the disclosing party had knowledge of the private information prior to signing the NDA, or that the information was obtained outside of its scope. 

Recent Examples

The Harvey Weinstein scandal and #MeToo movement put NDAs firmly in the spotlight. In many cases, it was alleged that NDAs had been used to prevent victims from raising legitimate complaints of serious sexual misconduct even to the authorities.  

In 1998 Mr Weinstein's former executive assistant, Zelda Perkins, resigned from her position when Mr Weinstein "sexually assaulted and attempted to rape" one of her colleagues. Ms Perkins told the WEC that she initially intended to take legal action against Mr Weinstein, but was told she had "no option other than to enter into an agreement with Mr. Weinstein and The Miramax Corp., accepting a financial damages settlement and signing a stringent and thoroughly egregious non-disclosure agreement".  The NDA prevented Ms Perkins from sharing her experience with her friends, family, lawyer, doctor, financial advisors and even the Inland Revenue without them first entering into separate NDAs.  The experience left Ms Perkins feeling like she would "probably go to jail" if she breached the NDA, leaving her “emotionally and psychologically drained, exhausted and disillusioned, having lost total faith in the legal system”.    The events also had a significant impact on Ms Perkins' career. She found it impossible to get work within the film industry, and soon left the UK to pursue new opportunities. 

It was reported elsewhere that Mr Weinstein threatened other alleged victims with oppressive legal proceedings, telling one that she would face "hundreds of thousands of dollars in lawsuits" if she breached her NDA.  

Such disclosures – often made in breach of existing NDAs – and the attendant public debate, serve as a reminder that NDAs may be unenforceable where they seek 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. Other examples of legitimate disclosures include information reportable to regulators and/or law enforcement agencies, or in connection with ongoing criminal investigations and prosecutions. 

Practical Tips

The recent scandals and WEC Report are a call to arms, for those deploying and advising on NDAs, to control and regulate their use. Specifically, the WEC Report recommends that legal advisers should be held to account, and asks that the Solicitors Regulation Authority and the Bar Standards Board – the bodies regulating the legal profession – hand down serious sanctions to lawyers who misuse NDAs. It also calls for the use of standard, approved confidentiality clauses written in plain English, which clearly state their purpose and effect.

With this in mind, here are five tips to ensure that your NDA does not fall foul of scrutiny:

  1. Standalone agreement: ensure that the parties' obligations are set out in a standalone NDA, rather than as a confidentiality clause in a wider employment or settlement agreement.
  2. Protected information: clearly define what information is private and protected by the agreement.
  3. Prohibited disclosures: expressly recognise that the NDA does not prohibit certain disclosures, such as the reporting of sexual harassment and professional misconduct, or information required to be disclosed by law.
  4. Duration: it is usual for NDAs to last between two and five years, although it can be stated to be kept confidential forever (subject to the information becoming public).
  5. Legal advice: ensure that the signatory has obtained independent legal advice prior to signing the NDA, and that the NDA includes a statement to this effect. This is an important safeguard to avoid the suggestion that you took unfair advantage of your employee.
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