Non-disclosure agreements (NDAs) are legally enforceable agreements under which it is agreed that certain information is kept confidential between parties. They are frequently used under the remit of employment and commercial matters. However, NDAs experienced a reputational shift during the #MeToo movement when a light was shone on the misuse of NDAs. Powerful parties forced others into signing NDAs to cover up wrongdoing and discourage those affected from speaking out. As regulated individuals, solicitors have an ethical duty to prevent the misuse of NDAs. While some critics argue for their removal altogether, when drafted correctly and in line with regulatory principles, NDAs remain an essential commercial tool.
Negative reputation
While NDAs were created to help protect ideas or sensitive commercial information, public perception has shifted. NDAs are now viewed as legal instruments that attempt to conceal wrongdoing. The #MeToo movement revealed that various public figures were misusing NDAs to silence victims. Harvey Weinstein famously used them to gag victims from speaking out, forcing more vulnerable parties to sign away their rights. Other well-known businesspeople are alleged to have used NDAs as a prohibitive tool to settle workplace harassment claims. Their use in this context is now commonplace.
Most recently, Phillip Schofield was asked by the BBC if his former lover had signed an NDA to prevent him from speaking out about their relationship (Schofield denied NDAs were involved). The fact he was asked highlights the negative assumption about NDAs. These high-profile cases have created a public perception of distrust around NDAs that is far removed from their everyday use in the commercial world. While not entirely unfounded, the fears of abuse can be tempered through proper drafting, execution, and increased awareness by legal professionals and signing parties.
Current limitations
Despite the controversy surrounding NDAs and their potential misuse, NDAs cannot inhibit protected disclosures or remove statutory rights. Those required to give evidence, for example in court, can be relieved of the contractual restrictions in an NDA to uphold the course of justice.
Lord Hain demonstrated an alternative means of circumvention when he named Philip Green as the relevant individual behind numerous NDAs, relying on parliamentary privilege. Hain believed that given the use of NDAs ‘to conceal the truth about serious and repeated sexual harassment, racist abuse and bullying’, he had a duty to identify Green. Green ‘categorically and wholly’ denied the allegations.
More recently, the debate surrounding matters of public interest resurfaced when Isabel Oakeshott publicised Matt Hancock’s WhatsApp messages regarding lockdown measures. While Hancock could, it appears, still seek legal enforcement of any NDA between them, Oakeshott argued the messages were released in the national interest. Supporters argue that the government’s pandemic measures are already subject to public inquiry and therefore the NDA should not apply.
One of Weinstein’s staunchest critics has campaigned in recent years for statutory intervention against the misuse of NDAs. Zelda Perkins, a one-time assistant at Weinstein’s Miramax in London (pictured), believes that legislating over the use of NDAs will prevent companies from acting unlawfully and compel them to handle company misdeeds more ethically. Perkins has further spoken out regarding the use of NDAs in universities. In 2020, the BBC reported that a third of universities had implemented NDAs to resolve sexual harassment complaints. In response, Perkins said protections regarding the use of NDAs at universities would ‘dramatically change the accountability and transparency of universities and [help] to break the cycle [of] abusive behaviour perpetuated by these agreements’.
Despite what could be perceived as objections to NDAs on a more general level, the then minister of higher and further education Michelle Donelan noted that ‘[using NDAs] to buy victims’ silence is a far cry from their proper purpose, for example to protect trade secrets’, indicating that NDAs still have a legitimate use in business settings. These public outcries have led to legislation banning the improper use of NDAs at universities. On 11 May 2023 the Higher Education (Freedom of Speech) Act received royal assent, with the government continuing to consider plans to legislate the use of NDAs in employment settings, a move supported by Miller.
Despite existing legalities, NDAs can still be drafted in a legal but unethical manner. For example, NDAs could be used to encourage vulnerable individuals to sign in order to end a workplace grievance. Similarly, exploiting a signatory’s lack of awareness could extend to including complicated language to prevent individuals from fully comprehending the document they are signing. Further, NDAs could unintentionally encourage wrongdoing by protecting individuals who continue to commit wrongdoings post-signature.
While differing in substance, these scenarios indicate ways around the current legalities, which demonstrate the abuses that can occur due to an imbalance of power. While statutory intervention and revised guidance policies could help reframe the perception of NDAs, in the interim those drafting NDAs are responsible for upholding the ethical framework of a well-drafted document.
Conflicting principles
As regulated individuals, solicitors have a responsibility for overseeing how NDAs are prepared. Legal professionals should draft with careful consideration of the SRA Standards and Regulations and Code of Conduct in mind. When two or more mandatory principles conflict, that which serves the public interest takes precedent, particularly regarding administration of justice. This is not dissimilar to how confidential information is treated under NDAs. The workarounds that have been applied to the NDAs of Green and Hancock indicate that concealing information in the public interest should be considered when drafting commercially sensitive NDAs. Rather than be subject to criticism for trying to conceal information, NDAs should be drafted to allow for legal disclosure as needed (many are).
In 2018, the SRA issued a Warning Notice following concerns about the misuse of NDAs and the potential effect they were having on preventing reports, or disclosure, being made. Solicitors should be aware of this notice, which indicates how the SRA could apply its code towards drafting confidentiality clauses. The SRA standards clarify that the wider public interest takes priority over client interests. Its position is that improper use of NDAs constitutes a breach of the principles.
Improper use of an NDA can include: preventing anyone from disclosing information in the public interest; preventing cooperation with criminal investigations; preventing disclosure regarding circumstances surrounding agreements to advisers; or including unenforceable clauses. Further, the SRA states there is a duty not to take unjust advantage of another party. This includes using oppressive tactics or confusing language, as noted earlier.
Further guidance has been published regarding good practice as related to NDAs. The Law Society has published guidance on NDAs in the employment context, and both the Equality and Human Rights Commission and Advisory, Conciliation and Arbitration Service have released further guidance to suggest principles of good practice.
NDAs are less likely to face criticism if the relevant codes of practice are upheld and if express wording is included allowing parties to make disclosures under various circumstances. Where relevant, solicitors drafting NDAs are advised to include provisions that parties can make disclosures if they are required to do so by law/regulatory bodies; to police/healthcare professionals; to legal advisers; if the information is already public; or pursuant to the Public Interest Disclosures Act 1998. It is in a party’s best interest to produce a document that upholds ethical standards and offsets major power imbalances.
Legitimate use (market commentary)
It is unlikely there will come a time when NDAs are not necessary in the commercial world. Aligned with a settlement agreement, they can reduce the chances of time-consuming litigation. In transactional work, they enable parties to maintain confidence in the investigation of a deal. NDAs can help protect trade secrets or intellectual property. Despite NDAs’ current use by businesses, companies in developed countries lose approximately 1-3% of GDP through theft of trade secrets, demonstrating the potential for further theft that could occur should NDAs be banned outright with no replacement protection measures put in place.
In May, the Legal Services Board opened a call for evidence on the role a solicitor’s conduct can play in the exploitation of NDAs. This investigation seeks to inform whether current regulations are sufficient in their role of upholding proper use of NDAs, and, should it find otherwise, the revised role that regulation could play in ensuring NDAs are used properly. Evidence received from this investigation will inform the LSB’s policy responses. It is particularly interested in receiving evidence from people who have been subject to the improper use of NDAs, practitioners in the field, regulators, and representative bodies.
Evidence will be considered of how regulation could be improved to more clearly state expectations of legal professionals responsible for preparing NDAs; supporting those professionals in their pursuit of ethical obligations; and enforcement of those duties, as necessary. The LSB expects evidence to guide it in its recommendation of amendments to relevant codes of conduct, improved training, and in the setting of reporting requirements.
The LSB has gathered initial evidence, including information contained in the Commons Women and Equalities Committee Report 2019 and guidance from both the SRA and Society. They hosted a conference in 2022 and have also researched information regarding experiences of misuse. This new call for evidence is attempting to gather the most up-to-date information available regarding information on both the legitimate and illegitimate use of NDAs, the conduct of those drafting them, and existing governing responses.
The LSB also wants recommendations on what legal professionals think the solution(s) could involve. The request for evidence is not limited to legal professionals; it is open to anyone interested in the subject matter. Submitted evidence could include reports, datasets, or research, in addition to personal reflections or examples based on experience to date. Supplementary evidence could include case studies regarding NDAs, such as the context under which they were entered into, whether signatories had legal support, if their signature impacted their life, and how effective the existing guidance has been.
There is hope that the review will inform how best the LSB can address the potential abuse of NDAs by putting together a strategy which supports standards of conduct to safeguard against these documents being used to cover up wrongdoing, silence signatories or deprive people unwittingly of their rights. Evidence can be submitted to the LSB until 14 July.
Current misuse of NDAs threatens the integrity of legal professionals. Ensuring their proper use supports the rule of law, in addition to upholding strong professional standards. While NDAs could evolve through legislation and revamped guidance policies, regulators are currently responsible for ensuring that any NDAs drafted in the interim follow current codes of practice and warning notices.
NDAs have come under fire for their recent misuse. It is up to regulators to question their legitimacy and ensure their ethical role in line with a legitimate, commercial purpose. NDAs have been, and will remain, a common feature in business. The interesting question for practitioners is whether they should consider matters beyond the regulatory framework when drafting.
Joel Seager is a partner and Jacqueline Holder a trainee solicitor at Fladgate LLP
1 Reader's comment