Legal Services Board to Consult on the Misuse of Non-Disclosure Agreements
The Legal Services Board is planning to consult on how to address the misuse of non-disclosure agreements within the legal profession.
What Is a Non-Disclosure Agreement?
In an employment context, a non-disclosure agreement (NDA) is a type of agreement that is used to stop an employee or worker sharing information about their job, their employer, or something that happened when they were employed. NDAs are also known as confidentiality agreements. They are often included in settlement agreements that are entered into in circumstances where the employer and employee mutually agree to terminate the employment.
Why Are NDAs Controversial?
The issue of how NDAs are used in an employment context has gathered pace in recent years. In particular, concerns have grown that NDAs are used to exploit the power imbalance between employers and their staff. NDAs must not be used to stop a person from blowing the whistle, or from reporting a crime to the police.
In the context of the solicitor/client relationship, concerns have also grown that some lawyers are operating unlawfully, or otherwise beyond their professional ethics, by helping clients cover up abusive behaviour such as sexual misconduct and harassment.
The Solicitors Regulation Authority (SRA) has previously issued warnings about how to use NDAs ethically.
What Action Is the Legal Services Board Taking?
The Legal Services Board (LSB) is expected to issue a call for evidence in March 2023, before consulting over the summer on how to address the misuse of NDAs. Any policy statement or guidance that results from the consultation is likely to be published next year.
Can NDAs Ever Be Used in Settlement Agreements?
Yes, it remains usual practice for confidentiality clauses to be included in settlement agreements. We would usually expect an employer's sensitive information to be kept confidential, as well as the facts and terms of a settlement agreement. It is also normal practice to include a requirement for neither party not to make derogatory statements about the other.
However, NDAs cannot be used to entirely gag a former employee. For example, it would be usual practice for the employee to be able to disclose the fact and terms of the settlement with their spouse or partner provided they agree to keep the information confidential. A clause should not purport to prevent a former employee from reporting a criminal offence, from blowing the whistle, or from providing information required to be provided to a regulator.
