SRA suggests requiring “cooling-off period” before NDAs are signed

SRA: Benefits and challenges of standard wording

Employees should be given a “cooling-off period” before signing non-disclosure agreements (NDAs), the Solicitors Regulation Authority (SRA) has suggested.

The regulator said it might also help every NDA to carry a “clear statement in a prominent position” about what it legally cannot exclude.

In its response to the government consultation on measures to prevent misuse of NDAs, the SRA said it has seen a range of clauses in the NDAs it has been investigating, including ones which:

  • permit disclosures only where they are “required” by law;
  • require documents to be held only by a party’s solicitors, for specified purposes (rather than by one of the parties to the agreement); and
  • restrict a party’s ability to participate in criminal or other proceedings or deter them from taking part in those proceedings.

The SRA backed the idea that no NDA should prevent people from reporting concerns to law enforcement agencies, whether or not drafted by solicitors – this is specifically prohibited in the SRA’s NDAs warning notice.

As to other limitations that could be placed on NDAs, the response said: “We have engaged with various stakeholders about this and a number of them have said that it might be useful for every settlement agreement to carry a clear statement in a prominent position setting out what it cannot exclude as a matter of law. This might help make the scope of these agreements clearer to people.

“It has also been suggested that providing a ‘cooling off’ period might be helpful, similar to the law relating to consumer credit agreements.

“Negotiating and finalising the terms of these settlement agreements may be emotional and distressing – it might therefore be helpful for the employee to have time to reflect once they are agreed.”

The SRA said stakeholders had also said it would be useful to set out the disclosures that confidentiality clauses could not prohibit, “in clear and plain language which is in a prominent position rather than hidden away at the back of a long agreement”.

It continued: “Some complainants in the cases that we are investigating were anxious about speaking to us because they thought they would be breaching the terms of their agreement, even in cases where they were not.”

The SRA’s Balancing Duties in Litigation document, published last November, stressed the importance of solicitors being clear about the scope of the NDA, as well as not behaving in a way that creates a false impression that the agreement went further than it did.

The response said there were benefits, but also challenges, in having standard wording of confidentiality clauses.

“Some of the stakeholders that we have spoken to have indicated that standard clauses would be useful as they would introduce a standard approach for all agreements whether they were drafted by lawyers or other advisers.

“We understand the reservations expressed by others that standard clauses may be overly restrictive and that a one size fits all approach is not necessarily workable.

“Such clauses may be better provided in good practice guidance and/or the proposed Statutory Code from bodies with a wider remit, such as the Equalities and Human Rights Commission or the Advisory, Conciliation and Arbitration Service.”

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