Plans to stop NDA abuse provide clarity but aren’t radical, lawyers say

Non-disclosure agreement (NDA) clauses that aim to stop victims reporting crimes to the police are “likely already unenforceable” under current laws, lawyers have said.

The government has unveiled its plan to crack down on the misuse of NDAs – or gagging clauses – to make sure they aren’t being used to silence victims of crimes.

Justice minister Lord Bellamy has added an amendment to the Victims and Prisoners Bill which would make NDAs banning victims from disclosing information to the police, authorities or confidential support services legally inapplicable.

The amendment, titled ‘Disclosures by victims that cannot be precluded by agreement’, states: “A provision in an agreement is void in so far as it purports to preclude the making of a disclosure…” by a victim to law enforcement; a qualified lawyer; to receive professional support; to victim support services; a regulator; or to their child, partner or parent. 

It comes after the government said just two weeks ago that new legislation will be introduced “as soon as parliamentary time allows”.

Justice secretary Alex Chalk pledged: “We are bringing an end to the murky world of non-disclosure agreements, which are too often used to sweep criminality under the carpet.”

While the influential Treasury select committee of MPs called for a ban on “misused” NDAs being used to “cover up” sexual harassment in the Square Mile, in a damning set of findings on sexism in the financial services industry.

The watchdog’s report, Sexism in the City, unveiled on International Women’s Day, called for legislation on NDAs, more protection for whistleblowers and more gender pay gap reporting.

However, lawyers have suggested that while the government’s provision offered “welcome clarification”, in fact, NDAs preventing victims going to the police would already be void.

Beth Hale, from CM Murray, said: “This is not a total ban on NDAs, nor a ban on NDAs in sexual harassment cases as we have seen in some other jurisdictions – but it is helpful clarification about the limits of such clauses where the conduct involved is criminal.

“In practice, provisions which seek to prevent reporting of criminal conduct to the appropriate authorities would likely already be unenforceable.”

Hale stressed that solicitors drafting such clauses would be in breach of their professional obligations – and that lawyers have “routinely included carve outs” of this nature for years.

“However, this very clear legislative provision is really helpful to ensure that victims of crime understand the limitations of any NDA they are asked to sign,” she added.

Lindsey Cartwright, employment partner at Morton Fraser MacRoberts, added: “Current laws are that an NDA cannot prevent a protected disclosure under whistleblowing legislation being made, [but] require there be a wider public-interest aim in the mind of the complainer. 

“They do not cover situations where someone complains to protect their personal interests alone. And generally speaking, those complaining of sexual harassment at work are complaining because they want to stop the behaviour that they are experiencing.”

Cartwright told City A.M.: “I would expect the proposed change in the law will not, in itself, result in an increase in workplace sexual harassment claims, but it might well have the effect of more employers taking a zero-tolerance approach to perpetrators, as there will be no water-tight alternative which protects the reputation of the business.”

Liberal Democrat MP Layla Moran, who has campaigned for a ban on “deeply damaging” NDAs, said the news was a “welcome move” that would help victims access support.

But she stressed: “While this is a step in the right direction, the government is not going far enough in giving victims their voice back. We need a complete ban of NDAs in cases of sexual misconduct, harassment and bullying to ensure that no victim is silenced.”

Law Society president Nick Emmerson previously argued there should “be no provision in non-disclosure agreements (NDAs) that prevents disclosures to the police, regulated health and care professionals and legal professionals”.

He added: “Government should also legislate to ensure limitations in confidentiality clauses are clearly set out in employment contracts and settlement agreements and to enhance the independent legal advice received by individuals signing confidentiality clauses and NDAs.

While the government addresses the question of a wider ban, firms may choose to proceed with greater caution in their application of the legal documents.

Carl De Cicco, partner at Reed Smith, stressed: “It is essential for employers to exercise discretion in their use of NDAs, ensuring they are employed appropriately and in accordance with legal and ethical standards… meticulously crafted and aligned with regulatory guidelines. 

“Employers must also refrain from creating any perception that the terms of an NDA would hinder an employee from pursuing legitimate actions, such as reporting concerns to regulatory authorities, providing testimony in court, or seeking support from a therapist.”