Is it time to stop talking about gagging clauses?

The Solicitors Regulation Authority (SRA) has announced it has referred a solicitor from magic circle firm Allen & Overy to the Solicitors Disciplinary Tribunal over drawing-up a Non-Disclosure Agreement (NDA) on behalf of film Producer Harvey Weinstein.  It is understood the agreement, in essence, paid Mr Weinstein’s former assistant Zelda Perkins a large sum in exchange for her silence.  Ms Perkins claims she was the subject of sexual harassment by Mr Weinstein, and that she left her job after he sexually assaulted and attempted to rape her colleague.  She claims the NDA was arranged to stop her reporting or publishing these matters.

The SRA referral has focussed lawyers' minds on their responsibilities in such cases. It is understood that there are 13 other NDAs currently under investigation. Twelve months ago the SRA warned that NDAs should not be used to stop victims reporting sexual misconduct, either to the police or to professional regulators.

Government plans

In March, the government announced plans to prevent employers from using ‘gagging clauses’ to conceal complaints of sexual harassment, intimidation and racism. The idea is to ban employers from utilising Non-Disclosure Agreements that prevent staff from making reports to the police.
Business Minister Kelly Tolhurst said:-

“Many businesses use non-disclosure agreements and other confidentiality agreements for legitimate business reasons. What is completely unacceptable is the misuse of these agreements to silence victims, and there is evidence that this is becoming widespread. Our proposals will help to tackle this problem by making it clear in law that victims cannot be prevented from speaking to the police”

In 2018, Justice Minister Lucy Frazer also promised to curb gagging clauses that threaten to silence vulnerable women who suffer potentially criminal sexual harassment. She also told the Equality and Human Rights Commission that she would definitely tackle lawyers who were helping employers write unenforceable clauses into NDAs. She said:-

“It is right that government looks at whether there are gaps that can be filled if people aren’t being protected”

Valid uses for NDAs

It can be sensibly argued that NDAs can have lawful purposes, such as preventing a nanny from passing details of her employer’s personal life to a tabloid, or a departing executive not disclosing commercially sensitive data to a rival.  Ironically, NDAs have also been frequently used in politics, and not always without controversy.  The House of Commons has spent more than £2.4million on NDAs over the last five years.  In May 2018 the former private secretary to the Speaker of the House claimed he was paid over £86,000 as part of a deal which prevented him from repeating allegations of bullying by the Speaker of the House, John Bercow.  Angus Sinclair was paid the money in 2010 but publicly made the allegations in 2018 anyway.  It seems unlikely that he will be paying the money back any time soon.

Is paying an employee not to report a crime actually binding?

Whenever a government proposes topical new laws, the cynic should always ask: Is this really new law, or merely a headline-grabber?  In actual fact, the types of clauses targeted have, in many instances, been legally void for some time. Section 43J Employment Rights Act 1996 states that any agreement that purports to preclude a worker from making a ‘protected disclosure’ is void.  A protected disclosure is very widely defined by s43A and s43B as:-

- That a criminal offence has been committed, is being committed or is likely to be committed,
- That a person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject,
- That a miscarriage of justice has occurred, or is likely to occur,
- That the health and safety of any individual has been, is being or is likely to be endangered,
- That the environment has been, is being, or is likely to be damaged, or
- That information tending to show any matter falling within one of the preceding paragraphs has been, is being, or is likely to be deliberately concealed.

Anything resembling a sexual offence, is likely to be caught by section 43, and can therefore normally be disclosed to a prescribed list of people or, where certain conditions are met, to a much wider group of recipients.  In fairness, the list of prescribed people does not extend to the media, but freedom to make reports to the media is not what the current government review is targeting anyway.

A person in the position of Zelda Perkins, presuming they obtained legal advice, would have known about s43J.  Likewise, one assumes lawyers instructed by either party in such a dispute would have explained to their clients that, insofar as suppressing a criminal complaint is concerned, NDA such clauses offer are effectively useless.  It is hard to conceive that a report to the police of an alleged crime could, or would, have been met with a claim for breach of contract or confidence.  In such a situation - assuming the defendant's lawyer has not successfully misled their opponent about the limitations of such a clause - a question arises over what could make a lawyer culpable.  Is it suggested that the lawyer should have actively prevented an agreement that was willingly entered into by two parties?  Is the lawyer required to do more than provide honest, correct and confidential advice to their client?  Is it ethically wrong to advise him: “You can make that agreement with Ms Perkins if you like but, in practical terms, it is unenforceable. So if she takes the money and then reports you to the police anyway, there may be little you can do”?

Is it unethical for a lawyer to draft an agreement which is not enforceable in law, even if that is of benefit to her own client?

Let us suppose A accuses her employer, B, of slapping her bottom whenever she walks out of his office. B denies this, but decides he wants A to leave his employment as soon as possible. A intended to leave the job anyway. A and B agree to total confidentiality about A’s allegation, and in return B agrees to pay A £15,000 with no admission of liability.

To take SRA Principle 6 as an example, can it be that a lawyer drafting an NDA - and thus helps keep the alleged bottom-slapping confidential - has breached Principle 6?  In other words, is such a lawyer failing to act in a way that maintains the trust the public places in her, and in the provision of legal services? What if the NDA was drafted by A’s own lawyer, i.e. the victim of the alleged bottom-slapping?  Of course, the NDA would be unenforceable in many circumstances, but that very inability to enforce is surely of benefit to A, who can accept her £15,000 and still make a protected disclosure of it if she later changes her mind.  Moreover, by enabling her to do this, is A's lawyer "failing to act in a way that maintains the trust the public places in her, and in the provision of legal services"? Or is the lawyer they simply ensuring a good deal for their client, having negotiated an agreement on instructions?  Conceivably it would be a regulatory offence for B's lawyer to falsely tell A that the NDA prevents her from making a police report. But here A has no intention of calling police anyway.

The full facts of the Zelda Perkins case are yet to emerge and it is unclear whether Ms Perkins had her own lawyer.  If she did, it will be interesting to see whether any regulatory action is taken against them.

Despite the difficulty in enforcing them, it seems that numerous NDAs in respect of alleged misconduct are made anyway, presumably because they suit both parties who intend to abide by them. But essentially, if the employee accepts their ‘hush money’ and then discloses the misconduct anyway, there will often be little recourse for the employer. It seems likely that many would rather move on quietly than publicly make the allegation. Where a NDA is unenforceable, what precisely is the harm caused by a legally worthless agreement itself?

What about NDAs for allegations that are untrue?

Paul Philip, Chief Executive of the SRA said “NDAs have a valid use, but not for covering up serious misconduct and in some cases potential crimes”. We ought to apply that test whilst bearing in mind the uncomfortable fact that some allegations, including those of sexual assault and rape, are simply untrue. So, supposing B knows full well that A’s 'bottom-slapping' claim about him is untrue, and knows that he has not committed any misconduct or crime whatsoever, can B validly buy A’s silence via an NDA? Indeed, for an opportunistic and dishonest employee, that outcome might have been the aim all along.

In summary, whilst the NDA issue is framed as a situation where the strong and powerful are able to intimidate the weak and powerless, it must be remembered that an NDA is essentially the exchange of large amounts of money for silence. If the intimidation is so overwhelming, then why is it necessary to pay such large sums? This goes to the heart of the problem: the mischief is that NDAs are willingly entered into by both parties. It appears that some NDAs, though unenforceable by the Courts, have nevertheless been respected by the parties for years. Indeed, it took something like a #MeToo moment to reveal many of them.

It is true that a lawyer should not become engaged in bullying or intimidating his client’s opponent, but that truth applies irrespective of NDAs, and it is certainly not amplified because of them.

If you are a solicitor facing an SRA investigation for the application of an NDA or any other matters, feel free to contact our Regulatory team.