NDA: Agreements can have devastating impact
Examples of lawyers’ misconduct when dealing with non-disclosure agreements (NDAs) are a “cause for concern” and justify further regulatory action, the Legal Services Board (LSB) said this week.
The oversight regulator said there was a “strong rationale” for it to draw up policy options for a “strengthened and harmonised regulatory approach”.
In the 103 responses to the LSB’s call for evidence on NDAs [1] were examples of “legal (but unethical) and alleged illegal acts” concealed by NDAs.
A paper before yesterday’s meeting of the LSB’s board explained: “Examples of potentially legal but unethical acts concealed by NDAs included bullying, settlements over consumer products and construction and building disputes.
“Examples of alleged illegal activity reported by respondents as having been concealed by NDAs included unlawful harassment and discrimination (e.g on the grounds of sex, race, disability and maternity), sexual assault and abuse, fraud and tax evasion.”
These all “typically involved an imbalance of power between a party with more influence and resources and an individual made vulnerable by their circumstances”.
The impact of being subjected to an NDA could be “devastating”, whether it was on mental health, wellbeing, finances or future career opportunities.
The LSB said the responses highlighted “examples of legal professionals’ conduct that give us cause for concern” in the context of its wider programme of work on professional ethics and the rule of law.
“For example, there were accounts where individuals reported feeling pressured into signing agreements, where an imbalance of power led to a detrimental outcome for an individual and where individuals in vulnerable circumstances felt this was exploited to the benefit of the other party.
“We consider such conduct has the potential to undermine the rule of law and proper administration of justice and we will consider how regulation can best respond to address these concerns.”
The LSB said that, although it could not draw “any firm conclusions about the prevalence of misuse”, it was conscious that there were initial enquiries from the public that did not result in responses due to “concerns about what was permissible under the terms of an NDA”, while a further group of individuals “did not feel comfortable contacting us at all”.
The LSB was also conscious of the Higher Education (Freedom of Speech) Act, which became law in May 2023 and prevents universities from using NDAs to silence people who raise complaints about sexual misconduct, abuse, harassment or bullying.
Having reflecting on the responses, the LSB said, it concluded that there was “a strong rationale to take forward work in this area to scope policy options for a strengthened and harmonised regulatory approach”.
The government indicated last month [2] that it would resist calls for a statutory ban on NDAs in the workplace.
The Bar Council strongly criticised the LSB’s call for evidence in its response [3], describing it as “freighted with assumptions founded on anecdote and headlines”, while failing to reflect “the many good reasons” why NDAs were used by parties on both sides.
The barristers’ body later agreed to meet NDA campaign group Can’t Buy My Silence after founders Zelda Perkins – the first woman to break a Harvey Weinstein NDA – and Dr Julie Macfarlane criticised the Bar Council response in a blog for Legal Futures [4].