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          "Confidentiality Clauses in Settlement Agreements: Solicitors beware!"

          This article examines the various ways in which the Law Society, SRA and government have sought to address the public concern regarding the use of NDAs in an employment context and the importance of solicitors adhering to the current and possible future guidance and/or legislation in this area.

          Date: 24/05/2019

          In the wake of the recent case of (1) Arcadia Group Limited (2) Topshop/Topman Limited (3) Sir Philip Green v Telegraph Media Group Limited1  NDAs2  have been in the media spotlight.  As a result of this case, some commentators have branded NDAs as unethical or "gagging orders"3  and some have gone so far as to advocate the ban of NDAs in employment disputes all together.  Despite this, the use of NDAs is likely to continue; they can be used to protect both legitimate commercial interests and an individual's reputation.  This article examines the various ways in which the Law Society, SRA and government have sought to address the public concern regarding the use of NDAs in an employment context and aims to highlight the importance of solicitors adhering to the current and possible future guidance and/or legislation in this area.

          In the midst of the #metoo and #timesup movements, in March 2018, the SRA published a warning notice (the "Warning Notice") on the use of NDAs.  In summary, the SRA warned that solicitors should ensure that they do not: (i) use NDAs in circumstances in which the subject of the NDA may feel unable to notify regulators or law enforcement agencies about conduct which might, but for the NDA, be reportable; (ii) fail to notify the SRA of misconduct or a serious breach of the SRA's regulatory requirements by any person or firm; and (iii) use NDAs as a means of "improperly threatening litigation or other adverse consequences, or otherwise exerting inappropriate influence over people not to make disclosures which are protected by statute, or reportable to regulators or law enforcement agencies".  

          In mid-2018, Sir Philip Green and others (the "Claimants") applied for an injunction against the Daily Telegraph (the "Defendant") to restrain the disclosure of details concerning allegations of misconduct against the Claimants which had been the subject of NDAs. In October 2018 the Court of Appeal reversed a High Court judgment and granted the Claimants an interim injunction.  In short, the Court of Appeal considered that the NDAs had been entered into freely, with the benefit of legal advice, and that the Claimants were likely to persuade the Court at trial that the information should not be published.  On 25 October 2018, Lord Hain, in the House of Lords and using parliamentary privilege, identified one of the Claimants as Sir Philip Green.  On 8 February 2019, the High Court granted the Claimants permission to discontinue the proceedings; the Claimants contended that there was "insufficient confidentiality left in the information… to justify the risk...involved in pursuing it". This case, and other cases, resulted in a negative public perception of the use of NDAs with many holding the view that NDAs were being used to silence sexual harassment in the workplace.

          As a result of increased media and judicial scrutiny regarding NDAs, in January 2019 the Law Society published a Practice Note (the "Practice Note") which was concerned with the use of confidentiality provisions contained in NDAs in a workplace context.  The Practice Note, amongst other things, referred to the Warning Notice and reemphasised that a breach of the Warning Notice (and the guidance in the Practice Note) could lead to disciplinary action.  Indeed very recently it has been reported4  that a solicitor from Allen & Overy has been referred to the SDT over the issue of the NDA involving Harvey Weinstein.  Whilst no details of the allegations have been made public, Law Society Gazette have reported that this case is one of 13 other investigations which relate to NDAs.   

          As the regulators have taken action, so too has the Government.  In March 2019, the Government published a Consultation on "Confidentiality Clauses - measures to prevent misuse in situations of workplace harassment or discrimination".  The Consultation has asked for responses by the end of April 2019.  The Government's Consultation acknowledges the legitimate purpose and use of NDAs within an employment context.  The Consultation also outlines the existing legal limitations on NDAs in an employment context being that: (i) they should not remove someone's statutory rights as set out in the Employment Act 1996 or under the Equality Act 2010 (albeit it is possible for a worker to waive their right to bring an employment tribunal claim); and (ii) they should not remove a worker's right to " whistleblow".  Moreover, in order for settlement agreements to be valid, the worker must have received independent legal advice.

          There are five main areas of focus for the Consultation: (i) the extent to which NDAs can cover workplace harassment or discrimination; (ii) excluding disclosures to the police and others from NDAs; (iii) the wording of NDAs; (iv) the extent of the independent legal advice as referred to above; and (v) enforcement of NDAs.  Some of these areas of focus are aimed at either extending existing limitations or making existing limitations on NDAs clearer for employees.  For example, as mentioned above, NDAs cannot prevent protected whistleblowing disclosures and this includes workplace discrimination or harassment in any event; the Consultation therefore asks  whether legislation should make it expressly clear whether or not an NDA can apply to workplace harassment or discrimination situations.   

          In view of the evolving landscape in respect of NDAs, solicitors who draft such agreements, and particularly in an employment context, should be mindful of the areas of focus of the Consultation and seek to ensure that the NDA is fully compliant with those issues contained within the Warning Notice and the Practice Note.  Existing NDAs should be reviewed to make sure that they comply with the Guidance and that they do not, for example, prevent a disclosure to the relevant regulator or police authority.  Moreover, if acting for an employer, the solicitor should be mindful of the need for the employee to take independent legal advice before entering into the NDA.  In view of the Consultation, it is likely that the use and/or scope of NDAs in the workplace may become increasingly restricted and place further duties upon solicitors to ensure that they are complying with their regulatory and statutory obligations in this area.

          1 [2019] EWHC 223 (QB)
          2 We have referred to the term NDA (i.e. Non-Disclosure Agreement) in this article; it is implied that this term is also a reference to confidentiality clauses within settlement agreements.
          3 See article "UK universities face 'gagging order' criticism" by Rianna Croxford at https://www.bbc.co.uk/news/education-47936662
          4 See article "Allen & Overy solicitor prosecuted over Weinstein NDA" by John Hyde dated 3 April 2019 in the Law Society Gazette

          Related people

          Helen Smith

          • Senior Associate