The #MeToo movement has shone a light on sexual misconduct and harassment, which has been around for a long time, but is only more recently being increasingly addressed. The press attention on the Harvey Weinstein settlement agreement with Zelda Perkins first highlighted Non-Disclosure Agreement (NDA) wording as an issue of concern in this context, as it included draconian NDA wording.
What are NDAs
By way of background, NDAs are commonly used in a commercial context, typically in the case of a proposed merger between companies when confidential information is shared between the parties to allow negotiations to progress. Why then is the use of NDAs in the employment context different? Typically the NDA will be included in a so-called settlement agreement (which used to go by the name of compromise agreement) which provides a statutory mechanism to settle potential statutory employment law claims between an employer and employee. In order for this settlement agreement to be valid, the employee in question will have to be advised by an independent lawyer.
This independent legal advice should provide some protection to the employee, as they will be advised on the agreement and its provisions, including the NDA wording. The difficulty in this context is, however, the inequality of bargaining power. In cases of sexual misconduct allegations, the employee is likely to be in an even more vulnerable position than on a usual exit and the reputational pressure on both parties will be greater.
In many cases an agreed NDA, if properly approached and addressed, can be in both parties’ interest. Particularly where the employer has taken action against an alleged perpetrator of sexual misconduct and addressed the underlying issues giving rise to any sexual harassment or misconduct, this can be an appropriate approach. If the employee wishes to move on and draw a line under the issue, this will also support that process.
The difficulty arises when the underlying issue is not addressed by the employer.
Why are NDAs so contentious
The reason NDAs have been in sharp focus is that these agreements, in some cases, have included wording to prevent sexual misconduct from being reported to the police and the appropriate authorities. The employee in question is in effect silenced with a threat of sanctions if the NDA is breached. The perpetrator is left to continue acting with impunity for years, with many further victims, as was allegedly the case with Harvey Weinstein. In fact the Allen & Overy partner who drafted the Harvey Weinstein NDA agreement in 1998 was investigated by the SRA and referred to the Solicitors Disciplinary Tribunal in June 2019.
The Women and Equalities Committee Report on NDAs
The Women and Equalities Committee published a Report on NDAs in Discrimination Cases on 11 June 2019 and sought to look at their use in more detail and explore the key areas of concern.
The report found that allegations of unlawful discrimination and sexual harassment at work are routinely covered up by employers through NDAs. The report further found that the increasingly widespread practice effectively enabled perpetrators to carry on mistreating others. A key issue of concern for the Committee was the difficulty for the complainant in pursuing legal claims through the employment tribunal system. Major factors were the legal costs of running a case and effective absence of funding support. It found complainants are left with no option but to settle their potential claims and sign up to NDAs. It was also found to be a concern that the evidence to the Committee seemed to suggest that employers may be withholding employment references unless a settlement agreement was entered into. Another key concern highlighted by the report was that the relatively new system of online Tribunal decision reporting meant that individual complainant’s names could easily be searched by any prospective new employer. This may have a negative impact on any job search, with employees who have brought a Tribunal claim effectively being blacklisted.
The Committee called on the government to begin a programme to raise awareness among employers and employees on how to conduct a grievance process fairly and effectively. It also suggested that ministers should consider requiring employers to investigate all discrimination and harassment complaints regardless of whether a settlement is reached. The report also suggested the government should legislate to require employers to provide a basic reference for any employee confirming they worked for the employer with dates of employment.
The Committee further called on the government to urgently improve the remedies that can be awarded by the employment tribunal as well as the costs regime to reduce the disincentives to taking a case forward.
The Future Approach
The #MeToo movement has changed public perception of what is acceptable and respectful behaviour between colleagues and this has shifted attitudes fundamentally and that is to be welcomed. What has also changed is a feeling that people who have been at the receiving end of sexual harassment are now able to speak up.
An outright ban of NDAs is unlikely in practice, as, despite recent headlines around the more extreme cases, in many cases NDA wording is accepted as being in the interests of both the employer and employee. However, the current public perception of NDAs allowing employers to knowingly accept or condone unlawful conduct within their ranks and the ongoing media interest is likely to lead to some further regulation of NDAs. Clearer guidance from the government, with recommended drafting of NDA clauses, would be welcomed by the legal profession.
Subscribe to get your daily business insights