"NDAs" – a storm in a teacup?
When did we start talking about NDAs? The confidentiality provision has been around in this jurisdiction for a very long time. It is unsexy, tedious, boilerplate. Until recently, most lawyers (whether we admit it or not) copied confidentiality provisions out of a precedent with barely a second glance. The NDA on the other hand is an altogether more glamorous, stealthy and insidious creature that historically made its home in the realm of glitzy Hollywood television series until (ironically) a very public Hollywood scandal put the term on the radar of the English legal profession.
Going back to the beginning, the social media movement that has become known as #metoo cast a light on women's everyday experiences of sexual assault, abuse and harassment, which many (men?) had considered to be a thing of the past. Beyond shocking stories of intimidation and assault on the streets and (perhaps at times overcooked) stories of the occasional catcall, stories of widespread workplace harassment sent a shockwave through the business world. Perhaps surprising is the way in which public (and government) frustration has been focusing on the confidentiality of out of court settlements. Type "NDA" into Google News, and you get "about 51,800,000" hits. By comparison, if you type "sexual harassment" into Google News, you will get "about 30,000,000".
Let us call a spade a spade: NDAs (non-disclosure agreements) are used now to refer to any legal agreement that contains a provision restricting the disclosure of information. The term is likely to catch virtually any legal agreement that you care to pick up. For employment lawyers, the bone of contention is the statutory settlement agreement, being cast in recent discussion as a central part of what the Women and Equalities Committee referred to in its report on The use of non-disclosure agreements in discrimination cases (published 11 June 2019, the "WEC Report") as "legally sanctioned secrecy".
At the root of the discussion is a set of extremely aggressive and unusual confidentiality protections in a settlement agreement signed by Harvey Weinstein's former assistant, Zelda Perkins. The provisions ran to five pages and went so far as to regulate the disclosure of information to medical professionals and professional advisors. The invasive nature of the restrictions, coupled with the gory details of Mr Weinstein's campaigns of harassment and bullying, caught the public imagination and turned the focus from perpetrators and employers to their lawyers.
The Solicitors Regulation Authority has responded with a stern reminder to solicitors of their professional obligations and the potential consequences of breaching them, and with clear guidance on what is and what is not acceptable in the drafting of confidentiality obligations.
The government responded with a consultation on the stronger regulation of confidentiality provisions in settlement agreements, which closed on 29 April 2019. It sought views on proposals to render void confidentiality provisions that do not clearly state their legal limits, by setting out that signatories are not restricted from making disclosures to the police, cooperating with a criminal investigation, or making whistleblowing disclosures. Separately, the government proposed to extend the requirement for employees to be independently advised on the terms and effect of a statutory settlement agreement for it to be effective to specific legal advice on the effects (and limits) of confidentiality provisions. As at the date of writing, the government has confirmed its intention to introduce legislation to implement these proposals (and to make express the somewhat obvious fact that you cannot use a confidentiality clause to prevent someone from seeing a doctor or lawyer), though, as yet, we have seen no detail on this that goes beyond the consultation proposals.. These changes are sensible (though, from a quick Google, apparently not sufficiently exciting to hold the interest of the UK tabloid press), and employers should begin to review and amend their existing template settlement agreements to future proof against these changes.
However, the WEC Report's recommendations in relation to the future treatment of "NDAs" went significantly further than this. Of particular note is the Committee's suggestion that while an employer may have a legitimate interest in keeping settlement amounts confidential, it should be for the employee to decide in all cases whether they wish to discuss their discriminatory treatment with a (potential) new employer or any other third party. The proposal effectively guts any confidentiality of the settlement, bar the settlement amount.
As commentators have recognised across the board, the ability to keep a matter confidential is a key incentive for employers to settle disputes at all. Many if not most cases of discrimination and/or harassment are not clear-cut. If settlements do not bring with them the added benefit of confidentiality, there will often be no advantage to the employer in pre-empting the Tribunal's decision by paying a settlement. Add to this the fact that, in the court of public opinion, a settlement is considered (often incorrectly) to be an admission of guilt, rather than a tool to manage risk, and you find yourself in a world where settlements become virtually unheard of. In arguably the best case scenario, this will result in an already overloaded Tribunal system overflowing with discrimination and harassment cases. More likely, it will result in the majority of victims in all but completely clear-cut harassment cases declining to pursue complaints at all and losing any recourse against employers. It will not come as a surprise that these proposals have been met with resounding silence from the (now former) government.
Tellingly, the bulk of the WEC Report does not in substance deal with "NDAs" at all. It grapples with the bigger issues: how can the government ensure that employers take action to investigate complaints after they have been made, and, before you have a victim at all, to improve workplace culture and prevent more women suffering discrimination and harassment? Many of the recommendations focus on access to the Tribunal system (including recommendations on extending time limits from three to six months and improving support for litigants in person) and shifting the burden of enforcement away from individual victims. An interesting recommendation focuses on corporate governance, suggesting that employers be required to appoint a board level senior manager to have oversight of instances of discrimination and harassment as part of their health and safety obligations.
The point? In our view, "NDAs" are largely a sideshow to a bigger issue. The current debate was sparked by an, if not isolated then highly unusual, overreach in the drafting of a particular set of confidentiality provisions. A reform that tweaks the law around confidentiality in settlement agreements will ensure that this cannot be repeated in future, while continuing to enable parties to cleanly resolve disputes without a messy, costly and stressful Tribunal process. Further changes that will have the effect of removing the settlement route altogether in employment disputes involving discrimination are highly unlikely to get past start mark. We expect the government to pass their limited reforms, and for the debate around "NDAs" in this space to then largely die down.
The more interesting issues lie in questions around how the interests of individual victims (who often want nothing more than a settlement and a clean exit) can be balanced against the public interest in stamping out serious workplace harassment. The meat is in how the law around discrimination and harassment can be enforced, and (which may be a separate question) how access to criminal and civil justice for victims of sexual harassment and assault in the workplace can be improved. Indeed, the (now former) government, which tried to put "the women issue" back into the spotlight in the dying days of Theresa May's tenure with Penny Mordaunt MP's "roadmap for change" (perhaps, just a little bit, with the aim of pre-emptively embarrassing BoJo), has already kicked off the process of tackling the meatier questions in its consultation on Sexual Harassment in the Workplace, published on 11 July 2019, which includes ambitious and eminently sensible ideas for reform. The detail of this is the subject of a four-part blog series that we have run over the course of this week, with you can access on our Employment Law Blog.
Further constructive debate on how the system as a whole can be improved is welcome. We expect and profoundly hope that this will now move back into the spotlight, and that the "NDA" will return to the world of Suits and The Good Wife, to be replaced by the boring old boilerplate confidentiality clause.