Signing a non-disclosure agreement often has ‘devastating impacts’ on individuals and can cause mental health issues.
A summary of evidence report by law regulator the Legal Service Board (LSB) has offered fresh insights on non-disclosure agreements (NDAs).
Many of those who wrote to the LSB about their experiences reported “suffering devastating impacts” from signing an NDA according to the LSB. Mental health issues had stemmed from the fear of retribution after potentially breaching the terms of their NDAs.
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One legal professional told the LSB that it was inappropriate for survivors of sexual abuse in the workplace to be faced with signing a “gagging” clause at a time of high anxiety. Telling the truth about a situation could rebalance the power relationship between big organisations and individuals, they said.
Maria Miller MP reported that people often became victims twice over: firstly, when having to sign the NDA then enduring the forced silence that followed. This led to “perpetual re-victimisation” that results in feelings of isolation and a loss of confidence.
She pointed out that the worst cases involved individuals feeling they could not seek help from health professionals for support for fear of breaching the NDA. Also, being unable to discuss reasons for leaving a previous job could cause an erosion of self-confidence, thereby disrupting careers.
Examples of alleged illegal activity reported by respondents which were concealed by NDAs included unlawful harassment and discrimination (on the grounds of sex, race, disability and maternity), sexual assault and abuse, fraud and tax evasion.
I didn’t have another job to go to immediately… I had no choice but to sign the NDA” – report respondent
Examples of unethical acts concealed by NDAs – which may, however, have been legal – included bullying.
Employment disputes were the cause of a high proportion of the NDAs. Signees raised questions about whether NDAs should ever be used to conceal misconduct and prevent a victim of wrongdoing from seeking support or reporting.
The LSB noted that some disclosures were unnecessary because they were protected under existing laws, and that knowledge of existing legal protections was not widespread. In particular, there was limited awareness of the Solicitors Regulation Authority’s warning notice on the use of NDAs, which specifies a number of provisions from the SRA’s Code of Conduct for solicitors, and the Code of Conduct for firms, which may be breached when NDAs are misused.
Respondents ranged from people in junior roles to senior leaders in a wide range of sectors including entertainment, higher education, professional services (including the legal profession), charities, the public sector, and the private sector.
Imbalance of power was a typical dynamic behind the signing of NDAs. The report stated: “The most frequently cited dynamic was that between an employer and employee, where an employee was dependent on their employer for financial compensation or a reference, after experiencing misconduct and voluntarily leaving an organisation or being dismissed.”
I was having complications with my pregnancy and I thought the stress of fighting my employers might affect my baby, so I agreed to sign” – report respondent
The report quoted a response which stated “I didn’t have another job to go to immediately… I had no choice but to sign the NDA.”
Another individual wrote that they had opted to sign an NDA because there was a two-year wait for them to have a hearing at an employment tribunal and they felt under too much stress to wait.
There were also submissions in which an employer had taken advantage of an individual’s protected characteristics, such as a disability, and coerced the individual to sign an NDA with little to no legal advice or support.
Maternity discrimination
There were more than 30 reports of workplace maternity discrimination involving a NDA, many reported to the LSB by Maternity Action. The report quoted a person who said: “I was having complications with my pregnancy and I thought the stress of fighting my employers might affect my baby, so I agreed to sign.” Maternity disputes left many employees vulnerable to power imbalances.
It was found to be increasingly common in contracts for professional services (such as estate agents, financial services and healthcare services) to include an NDA that prevents people from reporting wrongdoing to the relevant regulator, the report found.
We want to see a legal sector that provides high-quality legal services and strong professional ethics” – Matthew Hill, LSB chief executive
One submission to the report argued that NDAs were sometimes presented as something victims wanted which, in their view, sought to justify improper use. Another put the point that the disadvantages of using NDA provisions needed to be counterbalanced against the benefits to an individual of wanting swift resolution in a workplace dispute.
Without an NDA, employers had no incentive to enter into settlement agreements, the submission argued, adding that restrictions on NDAs were unlikely to increase the public accountability of employers or community awareness of maternity discrimination.
Professional ethics
For LSB chief executive Matthew Hill the report had succeeded in showing that NDA misuse could have a devastating impact on people’s lives.
He said: “We want to see a legal sector that provides high-quality legal services and strong professional ethics, where the conduct of lawyers is consistent with upholding the rule of law. This report forms an important part of our evidence base as we consider whether the regulatory framework may need to be adapted to help realise this ambition.”
Law Society of England and Wales president Nick Emmerson said he looked forward to reading the board’s analysis of the existing regulatory and legislative framework and would consider any proposals the LSB had to improve it.
He added: “We recommend that all solicitors who advise on NDAs in employment situations read both the Solicitors Regulation Authority’s Warning Notice and our practice note on the subject. These clearly set out a solicitor’s legal, regulatory and ethical responsibilities when advising on the use of NDAs.”
The LSB pointed out that its sample was skewed because people satisfied with the NDA they had signed were less likely to have responded to its call for evidence.
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