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Confidentiality and Non-Disclosure Agreements: Talk Is Cheap But All The Money In The World Cannot Buy A Golden Silence

Confidentiality and Non-Disclosure Agreements (“NDAs”) are constantly in the headlines right now.   In the post-#MeToo era and with the fallout from the revelation and criminal prosecution of Hollywood mogul, Harvey Weinstein, powerful celebrities who previously relied on their wealth and expensive lawyers to keep their dirty laundry hidden from the public’s eye, can settle claims for damages, but cannot buy their victim’s silence.

Whereas Weinstein and his ilk routinely used NDAs to prevent their victims from speaking out about their alleged crimes and misdemeanours, the law has now well and truly caught up with them and their lawyers.   Now, the courts and the legal profession’s regulators are clamping down on so-called “gagging orders” that seek to “buy-off” a claimant’s silence and thereby prevent them from going to the press or the law enforcement authorities.  Such contractual arrangements are no longer enforceable, if indeed they ever had any legal effect.

Furthermore, there may be severe regulatory consequences for legal professionals who prepare such agreements in the form of investigation, prosecution and disciplinary action from the Solicitors Regulation Authority (“SRA”).   The partners at “Magic Circle” firm Allen & Overy who acted for Harvey Weinstein and drafted an NDA attempting to silence one of his victims in return for a damages payment are now being prosecuted by the Solicitors Disciplinary Tribunal (“SDT”) following an investigation by the SRA; one of 13 recent investigations for NDAs in sexual harassment cases.

The SRA have issued all its members with a Practice Note explaining the legality and professional conduct issues of preparing NDAs:

We consider that NDAs would be improperly used if you sought to:

  • use an NDA as a means of preventing, or seeking to impede or deter, a person from:
  • reporting misconduct, or a serious breach of our regulatory requirements to us, or making an equivalent report to any other body responsible for supervising or regulating the matters in question
  • making a protected disclosure under the Public Interest Disclosure Act 1998
  • reporting an offence to a law enforcement agency
  • co-operating with a criminal investigation or prosecution
  • use an NDA to influence the substance of such a report, disclosure or co-operation
  • use an NDA as a means of improperly threatening litigation against, or otherwise seeking improperly to influence, an individual in order to prevent or deter or influence a proper disclosure
  • prevent someone who has entered into an NDA from keeping or receiving a copy.

NDAs or other settlement terms must not stipulate, and the person expected to agree the NDA must not be given the impression, that reporting or disclosure as set out above is prohibited.  It may be appropriate for the NDA itself to be clear about what disclosures are not prohibited by the NDA.

The Law Society has also issued a guidance note to the public raising awareness of what an NDA can and cannot impose on them.

A good employment dispute or civil litigation settlement agreement may well seek to impose confidentiality obligations on the parties.   However, these must be limited to certain sensitive financial and professional reputation issues where there is no wider public interest in such information coming into the public domain.

The subject matter of an enforceable NDA will be limited to the nature and subject matter of the dispute and the terms of the financial settlement.   However, the NDA should always allow the parties to discuss both with their spouse, next-of-kin and other financial dependants, as well as their legal and financial professional advisers.

Most importantly, the NDA must expressly exclude any and all suggestion that it is preventing either party from making a public interest disclosure.

Therefore, while a settlement agreement terminating an employee’s contract of employment and compromising any and all potential claims for breach of contract and breach of the employment rights, equalities and public interest disclosure legalisation, it cannot “contract out” of the employee from making the disclosure itself.

Disclaimer

This article does not constitute formal legal advice.   No solicitor-client retainer with either the writer or the firm is created by you reading it nor acting on its contents.   If you are affected by any of the issues in this article, we strongly recommend that you instruct a solicitor or similarly qualified legal professional on a formal retainer to advise you.

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