Law Society guidance on the use of non-disclosure agreements (NDAs) demonstrates an absence of “ethical leadership” and shows why the profession cannot be allowed to sort such issues on its own, a leading academic has claimed.
Professor Richard Moorhead, professor of law and professional ethics at University College London (UCL), said NDAs should not be banned – because lawyers would find a way around that – but recommended ways in which their use could be curbed.
The academic is special adviser to the House of Commons’ women and equalities committee in its inquiry on the use of NDAs in discrimination cases.
He followed up oral evidence given recently with written evidence, published yesterday, in which he called for the legal regulatory regime on NDAs to be greatly beefed up.
Professor Moorhead praised the Solicitors Regulation Authority’s (SRA) guidance on NDAs – although he identified certain improvements that could be made – but described the Law Society’s guidance, published in January, as “less useful”.
He explained: “It appears more concerned about asserting the legitimacy of using NDAs than it does about dealing effectively with the risks.”
The wording, he said, “suggests that substantiated allegations of potentially serious wrongdoing can nonetheless be subject to obligations of confidentiality to protect reputation”.
He continued: “In general it is less restrictive in its approach to NDAs than the SRA. As an example, they say that ‘Blocking the reporting of information that is relevant to regulating a sector is likely to be unacceptable to regulators’, keeping open the possibility that it is legitimate in certain (unspecified) circumstances.
“They do not consider at all the possibility that it might be a criminal offence or professional misconduct to so block information.”
Other failures included not saying that the drafting lawyer has to make their confidentiality clause clear and intelligible to those expected to be governed by them.
“They do not suggest that it is any part of the drafting lawyer to make their confidentiality clause clear and intelligible to those expected to be governed by them.
“This is in spite of the risk that drafting opaque clauses which have the effect of overplaying the extent of confidentiality obligation and underplaying the extent of any exceptions puts the solicitor at risk of breaching the SRA Code of Conduct (through taking unfair advantage of their client’s opponent).
“I am confident from my discussions with employment lawyers that this kind of obfuscation is a reasonably common practice designed to strengthen the hand of employers and accused executives benefiting from such agreements.”
Professor Moorhead said that overall the Law Society’s practice note was a “disappointing document that shows no ethical leadership in the field”.
“It is consistent with an approach which seeks to represent the interest of some of its members (employment lawyers) in doing what they, and some of their clients,” he wrote.
“It fails also, however, in protecting its members by not dealing anything like comprehensively with the ethical risks posed to their members by NDAs.
“Consideration of the public interest is most politely described as muted. Whilst it reminds solicitors of the SRA’s warning notice, it also runs the risk of diluting or confusing the messages in the SRA’s notice.
“It is a sign of what can be expected if calls for ‘the profession’ to be allowed to deal with this problem on their own are accepted: they are likely to put a particular view of the profession’s interest before the interests of the public.”
Professor Moorhead described the Bar Standards Board’s decision not to publish guidance as “regrettable”.
He concluded that, while there were good arguments for banning NDAs, there were also “real risks” in doing so, such as potentially leading to “avoidance behaviour” by lawyers who sought to “work around bans for their client”.
Rather, there were a number of possibilities short of a ban. These included:
- Regulatory obligations to “draft disclosure restrictions as narrowly as possible”;
- A “presumption that widely drawn, or general, confidentiality clauses are unenforceable and subject to other sanctions for those drafting and using”;
- The SRA reconsidering its view that compliance officers were not necessary among in-house lawyers working in non-legal organisations;
- The adoption of “standard NDA clauses, and explanations of rights under the agreement”;
- Lodging with a regulator – such as the SRA – “NDAs which deal with allegations of misconduct”; and
- Making the approval of an NDA by a regulated lawyer mandatory to prevent the unregulated sector moving in.
Earlier this week, meanwhile, Professor Moorhead chaired a discussion held at UCL between Karon Monaghan QC and Zelda Perkins, the woman whose NDA with Harvey Weinstein started the debate on their use.
Ms Perkins, who broke the NDA because she felt a “moral duty” to do so, described the legal process during the negotiation of an NDA with Weinstein’s lawyers as “intimidating”.
The NDA was very restrictive and although she since discovered much of it was unenforceable, she believed that any breach would end in her imprisonment.
The agreement included that she was not even able to have a copy of it. It took more than 20 years to obtain one. Even a parliamentary committee was unable to obtain it.
Ms Perkins said she expected she would be in serious legal jeopardy upon breaking the agreement, an impression for which she blamed the lawyers involved rather than a fear of Weinstein pursuing her.
She accepted there was a legitimate role for NDAs, for instance to protect intellectual property. But she said there was “no place” for NDAs in relation to abusive behaviour or harassment. They had a chilling effect on disclosing abuse in the public interest, she argued.
She said she was “not trying to lawyer bash”, but charged that the SRA guidance on NDAs was inadequate, and criticised the Bar Standards Board’s unwillingness to publish guidance.