SRA takes action in 24 cases of alleged NDA misuse

NDAs: SRA calls for cross-regulator guidance

The Solicitors Regulation Authority (SRA) has taken action of differing levels of severity in 24 cases where misconduct in relation to non-disclosure agreements (NDAs) was alleged, it has emerged.

It has also called for “harmonised cross-sector guidance” for the whole legal profession, a move which another of the legal regulators rejected.

The Legal Services Board (LSB) this week published a summary report of the 103 responses received to its call for evidence over the use of NDAs. These came from both within and without the profession, across a range of sectors.

The SRA reported that it had seen a rise in reports regarding the improper use of NDAs following publication of its updated NDA warning notice in 2020.

Since January 2023, it has issued 11 letters of advice, six warnings, six rebukes and one fine in response.

“The SRA reported that it was aware of misuse in employment, commercial and consumer disputes that involved elements of sexual misconduct, discrimination, or criminality,” the LSB said.

The Council for Licensed Conveyancers (CLC) said it was aware of employers “who sought to stifle current or former employees of its regulated community from engaging with regulatory processes or to frustrate post-whistleblowing investigations, resulting in witnesses being unavailable to give evidence to the CLC”.

Some legal respondents – including the Bar Standards Board, Employment Lawyers Association, employment law committee of Birmingham Law Society and IPReg (the Intellectual Property Regulation Board) – believed that NDA misuse was not widespread

Individuals who recounted their experiences talked about feeling forced to sign an NDA due to power imbalances, “even if they had the benefit of legal representation or a legal background themselves”.

They talked about the “devastating impacts” suffered from signing one, particularly around their mental and physical health, as well as reputational and career damage.

Of the 61 individuals who had direct experience of being asked to sign NDAs, 52 did so in the context of an employment dispute; 10 had no access to legal advice.

“One respondent reported that they had difficulty obtaining legal advice for a case relating to workplace bullying in a law firm as particular firms did not want to jeopardise any future work opportunities with the respondent’s employer,” the report said.

The campaign group Can’t Buy My Silence (CBMS) – co-founded by Harvey Weinstein NDA-breaker Zelda Perkins – said it regularly heard from people frustrated that their lawyer would not take instructions about not wanting to sign an NDA, and who also felt pressured by lawyers to sign.

CBMS argued that the current SRA guidance “provides insufficient clarity about improper professional conduct, particularly in relation to vulnerable clients and the duty not to take unfair advantage of others and clients generally”.

The group said it wanted regulators to draw a line between the use of NDAs to protect trade secrets and those that silenced complaints of criminal conduct, adding that regulators should tell lawyers that they “should not facilitate NDAs in disputes over misconduct, harassment, discrimination or fraud”.

The SRA’s two suggestions for strengthened regulation were first to expand public education in coordination with other legal services regulators to ensure that individuals were better informed of their rights, the enforceability of key clauses in an NDA, and the obligations of the legal professionals advising them.

Second, it called for “harmonised cross-sector guidance across the legal professions together with consistent enforcement action, to ensure that legal professionals balance their professional obligations and uphold public trust and confidence in the legal professions”.

However, IPReg argued that, without firm evidence of a widespread problem of misuse, generic, cross-sector guidance would not be useful; it was more appropriate for frontline regulators to generate their own guidance.

Dame Maria Miller MP – a former chair of the Commons’ women and equalities committee, which has strongly pushed for action on NDAs – told the LSB that ensuring legal professionals were obliged to think about the consequences for individual victims, even where this was not their direct client, could see fewer exploitative NDAs.

Whistleblowing charity Protect suggested that regulation could address the whistleblowing issues faced by in-house lawyers, as section 43B(4) of the Public Interest Disclosure Act 1998 excludes disclosures that breach legal professional privilege from qualifying for protection under law.

This meant an in-house lawyer may choose not to raise wrongdoing if they cannot escalate their concerns beyond their employer.

“Protect reported that in its view, an in-house lawyer cannot rely on section 43J of the Employment Rights Act 1996 if they sign a settlement agreement and the information they wish to make a disclosure about is a matter subject to legal professional privilege.

“Protect reported further that in-house lawyers should be allowed to make protected disclosures to either the SRA or the LSB, who could then pass that information on to the relevant regulator or law enforcement agency.”

The LSB concluded that the call for evidence “has highlighted examples of legal professionals’ conduct that give us cause for concern in the context of our wider programme of work on professional ethics”.

Such conduct has “the potential to undermine the rule of law and proper administration of justice” and the oversight regulator would consider how regulation could best respond to address these concerns.

The LSB also acknowledged the limitations of the information it received, meaning it could not draw firm conclusions about the prevalence of NDA misuse. It was also aware that those who were happy with the conduct of the lawyers involved in their NDAs were less likely to have made a submission.

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