LSB considers ban on NDAs unless employee asks for one

Perkins: Lawyers not being adequately held to account

Lawyers could be banned from drafting non-disclosure agreements (NDAs) in cases of sexual harassment, discrimination or whistleblowing unless the member of staff involved has asked for one, the Legal Services Board (LSB) has suggested.

Law firms could also be required to make annual reports to their regulators on the number and value of NDAs they have created, while individual lawyers could face “mandatory training”.

The oversight regulator is to issue a call for evidence in March on misuse of NDAs by lawyers, followed by a public consultation on the issue in the summer.

Regulatory policy manager Sally Al-Saleem wrote on the LSB’s Reshaping Legal Services website that an important part of addressing the “imbalance of power while keeping a complainant’s options open” was the existence of a “responsive regulatory framework” for lawyers and law firms.

This could involve legal regulators providing “clearer standards of conduct for example by expressly prohibiting lawyers from drafting NDAs for settling sexual harassment, discrimination, whistleblowing, or other serious misconduct, unless requested by the complainant who must have access to independent legal advice”.

Another option would be “expressly prohibiting the drafting of NDAs” in similar situations “as part of an employment contract”.

It could also involve “requiring law firms to annually report to the regulator data on the frequency, nature, rationale and sum of settlement through NDAs each year”.

Further options were regulators imposing mandatory training for lawyers or adopting “a clear policy on the construction of NDAs (e.g. plain English, what information is sensitive, clarity on what happens if there is a breach by either parties)”.

In a paper for this week’s meeting of its board, the LSB said that following the call for evidence, “we will develop policy options for consultation on the expectations of lawyers’ conduct in respect of the use of NDAs in connection with sexual misconduct, harassment, and discrimination in the workplace”.

The consultation in “late summer” would lead to the LSB issuing a policy statement or guidance in early 2024.

The LSB said the Solicitors Regulation Authority (SRA) had taken steps to provide guidance to solicitors on the ethical use of NDAs, by issuing a warning notice in March 2018, updated in November 2020.

“We are also aware that the SRA has issued sanctions in a number of cases regarding the inappropriate use of NDAs (although not limited to sexual harassment), is currently investigating some cases, and is conducting further policy work in this area.

“At least one other regulator has indicated that this would also be a focus for them.”

The LSB said the government proposed new legislation on NDAs in 2019 which included, among other things, ensuring that individuals signing NDAs obtain independent legal advice. The legislation is yet to be introduced.

However, the activity on NDAs, both in this jurisdiction and in others such as the US and New Zealand, would “strongly imply that there are weaknesses in the protections offered by existing legislative and regulatory frameworks which need to be addressed”.

The LSB recalled how NDA campaigner Zelda Perkins, who infamously signed one when working for Harvey Weinstein, told its conference last October that regulation and legislation “does not support the profession to make strong professional ethical decisions and lawyers are not adequately held to account in respect of them”.

The paper said that, given the capacity for misuse of NDAs to undermine the rule of law and have a negative impact on equality and diversity, as well as the appetite from government, regulators, the sector and the public to tackle it, there was “a strong policy imperative” for the LSB to carry out this work.

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