Government urges on legal regulators over NDA action

Tolhurst: Consulting over NDAs

The government is “strongly” encouraging legal regulators to take action over lawyers who advise on the use of potentially unenforceable provisions in non-disclosure agreements (NDAs).

However, it said a call by the House of Commons’ women and equalities committee to make it a criminal offence to propose an NDA that is unenforceable could itself be difficult to enforce.

The comments came in the government’s response to the select committee’s report, which said in July that the use of provisions in confidentiality agreements that could “reasonably be regarded as potentially unenforceable should be clearly understood to be a professional disciplinary offence for lawyers advising on such agreements”.

The response pointed out that, as the profession was independent of government, it was for regulators to tackle the issue, adding: “We are aware that the legal services regulators in England and Wales are already taking this matter seriously, and strongly encourage them to do so.”

It went on to list the work that is being done: in March, the Solicitors Regulation Authority (SRA) published a warning notice on NDAs, and then consulted on how to ensure that solicitors’ reporting obligations were clear.

“The SRA is also planning to issue further guidance and warnings to the regulated community, making it clear that potentially unenforceable provisions are a breach of regulatory requirements.”

It said the SRA was “working closely” with the Law Society “to make sure that any guidance issued by the Law Society is fully lined up with the regulator’s position”.

Further, the SRA’s annual Risk Outlook, published in July, contained a warning that that the regulator would take action against any firm that uses NDAs to cover up criminal activity or serious professional misconduct, while law firms that included unenforceable terms in contracts may also face allegations of misleading, or taking unfair advantage of, the other party.

“While we understand that barristers are less likely to be drafting NDAs than solicitors, the BSB [Bar Standards Board] is planning to issue new guidance on NDAs and to review the relevant sections of its handbook.”

Also, the Legal Choices website, run jointly by all the legal services regulators, how includes help and advice on reporting sexual harassment.

“The regulators are also involved in wider discussions about tackling these issues through their joint regulators forum, and through participation in events such as a recent Equality and Human Rights Commission roundtable.”

More broadly, the government agreed that individual workers may not be aware of their statutory rights when they have signed an NDA, “and so can be intimidated in pursuing claims of sexual harassment even where the NDA is unenforceable”.

It continued: “The government therefore agrees with the committee that NDAs require better regulation and a clearer explanation of the rights that a worker cannot abrogate by signing one. Particularly that workers have the right to make a public interest disclosure and to take a matter to an employment tribunal (unless this has been specifically waived by a valid settlement agreement).”

It is to consult on ensuring that any explanation to workers is clear, including the committee’s recommendation of a standard approved confidentiality clause.

“As part of this consultation, the government will consider how best to enforce such a requirement. The government believes that making it a criminal offence to propose an NDA that is unenforceable, as the committee recommends, could be difficult to enforce.

“However, the government will likewise consider and consult on enforcement approaches.”

The responses recognised the concern that the risk of not receiving compensation for legal costs of litigation may be dissuading people experiencing sexual harassment in the workplace from enforcing their rights.

“We have also heard that the fear of being responsible for their employer’s legal costs may also be a factor in deciding not to pursue a claim. These fears are echoed in the evidence submitted to the committee.”

However, the government did not suggest any remedy for this, beyond pointing to the availability of legal aid, subject to the statutory means and merits tests.

Other government moves promoted by the committee’s report included consulting on a statutory code of practice on sexual harassment and harassment at work which would set out what employers need to do to meet the existing duty to protect employees from harassment and victimisation in the workplace.

It will also consult on how best to strengthen and clarify the laws in relation to employers’ responsibility for third-party harassment, and explore the evidence for extending the time limits to bring any workplace discrimination and harassment case under the Equality Act 2010 to an employment tribunal from three to six months.

Business minister Kelly Tolhurst said: “It continues to disappoint me that in this day and age some women still face discrimination and harassment at work.

“One part of this is the minority of cases where non-disclosure agreements are used unethically, and employees may not be aware of their protections and rights. We will be consulting on these.”

Interested in this topic? Check out the Legal Futures Masterclass on NDAs, Harassment and Whistleblowing. 27 June 2019, London.

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