Non-Disclosure Agreements in the UK & IrelandPosted in : Supplementary Articles NI on 5 July 2023
Non-Disclosure Agreements in the UK & Ireland
Non-disclosure agreements (NDAs) have in the last few years been hotly debated in the English-speaking world. NDAs — also referred to as ‘confidentiality clauses’ or, in a more pejorative context, ‘gagging clauses’ — are legal contracts that stipulate how information may be shared in confidence (or in most cases, not shared at all!). They thus preclude the further transmission of specific confidential information and can do so, in the most stringent cases, indefinitely. Serious criticism began to be levelled against NDAs during the emergence of the MeToo movement. The MeToo movement recognised and railed against the fact these legally binding agreements were, they argued, used to silence women who had been victims of sexual harassment and/or abuse in the workplace.
In spite of their poor reputation, accrued over decades, NDAs continue to remain commonplace. Between 2016 and 2020, nearly one third of British universities had employed NDAs to ringfence student grievances, according to the BBC. One reason for the prominence of NDAs is clear: non-disclosure agreements, alongside tangential legal arrangements, such as covenants not to compete (CNCs) and non-solicitation agreements (NSAs), serve a practical commercial purpose if employed responsibly. Where employed in good faith and propriety, each of these arrangements can protect legitimate commercial interests and ensure markets remain fair and competitive.
This article will explore the form and frequency of NDAs in the English-speaking world, particularly in the UK and Ireland, and will outline how effectively they work in practice. It will consider in greater depth the reasons for which NDAs now provoke such controversy. Finally, the current legislation on NDAs and oncoming legislative developments will be discussed before concluding.
NDAs: Form and Frequency
Non-disclosure agreements come in two distinct forms: one way and mutual. One-way NDAs are applicable to situations in which only one party is providing information that must be treated confidentially. Mutual NDAs are to be employed when both parties are supplying information to one another. Whatever may be the specific information-sharing arrangement, the information provider has legal recourse in the scenario where confidential information is leaked or otherwise improperly shared.
Roderic O’Gorman, in his 2022 report for Ireland’s Department of Children, Equality, Disability, Integration and Youth, concluded that “NDAs are commonly used in a range of contexts within Ireland and other jurisdictions; however the inherent secrecy of NDAs presents a challenge to researchers and policy makers.” This statements confirms not only the continued presence of NDAs in Ireland but, concerningly, society’s inevitable ignorance as to exactly how prevalent they are. In a 2014 American research paper around CEO employment contracts, of 500 randomly-sampled S&P 1500 companies, “87.1% of all contracts stop CEOs from disclosing confidential information. It is also common for NDAs to include a host of other more detailed prohibitions, often for an indefinite period of time.” Due to a CEO’s important position within a company, it is logical that their ability to share confidential commercial information, either during their tenure or beyond it, is restrained. Hence why such confidentiality agreements constitute a fundament of their initial contract. However, such NDAs — those predetermined in initial contracts — are outliers: the majority of NDAs are put in place when an employee’s relationship with their firm is coming to a close.
This is an important distinction to make: pre-emptive NDAs, exemplified by the clauses woven into CEOs’ signing-on contracts, effectively disallow an individual, in advance, from disclosing specific information. NDAs may also be included as part of an employee’s severance from a company or in a dispute settlement, in which case an NDA is employed to resolve a conflict between employee and employer. Whilst both pre-emptive and non-pre-emptive NDAs can be and are used for legitimate and justifiable purposes, both are equally susceptible to being abused. Where they are abused, those subject to them can be placed into unenviable, untenable, and unacceptable positions of bound silence. This outcome directs us towards the second section of this report, in which we will consider exactly why NDAs have become so controversial, if not outrightly reviled.
NDAs: The Controversy
Pre-emptive or otherwise, NDAs possess the potential to consign a given party to enforced and enduring silence, even despite the public interest. It is an extremely powerful legal tool that, if employed nefariously, particularly against those who may not be aware of what it entails, can have serious consequences.
In the case of pre-emptive NDAs, where an individual consents to certain topics of confidentiality within their initial employment contract, the signatory may be unknowingly signing off the right to challenge or discuss publicly difficulties that constitute real problems in their workplace’s culture or approach. Not having worked in the company before, and therefore reasonably incapable of foreseeing the concrete ramifications of their assent, they would do so with an insufficiently clear picture as to what lay ahead. Caution therefore needs to be taken to ensure that pre-emptive NDAs do not overstep a responsible and justifiable remit.
Where an NDA is not pre-emptive and is used instead in a form of employment termination or dispute settlement, the opportunity for malpractice may be even more rife. Consider the power imbalance that may exist between a superior advocating for an NDA, say, to ringfence information related to a workplace incident, and the company employee pressured into signing it; in such cases, the agency of the individual who submits to the NDA [LM1] must be put into question, and the NDA’s moral standing doubted. If this power imbalance were to manifest itself repeatedly — such that a number of employees undergo the same seemingly coercive process — there is a real risk that trends of unacceptable behaviour, harassment, and abuse begin to cement themselves within an organisation whilst the perpetrators go unnoticed, unreprimanded, and are free to re-offend. When numerous British universities were exposed for having used NDAs with students, as mentioned above, former Minister of State at the Department of Education Chris Skidmore openly declared it “an abuse of power”.
If politicians, executives, directors, and stakeholders are becoming wise to the misuse of NDAs and the damaging impact they can have on citizens, freedom of speech, and commercial reputation, the following question follows naturally. How are they tackling such misuse and how do they plan to adapt the concept of NDAs so that they can be used from here on out in a more responsible manner and with more robust legislative guardrails?
NDAs: The Legislation
At the time of writing, in Ireland, the Employment Equality (Amendment) (Non-Disclosure Agreements) Bill 2021 [LM2] is passing through and being scrutinised by the Houses of the Oireachtas (Irish parliament). This Bill proposes to “restrict the use of non-disclosure agreements as they relate to incidents of workplace sexual harassment and discrimination”. This Amendment, which, if passed, would be inserted into the Employment Equality Act 1998 – 2015, permits the formation of NDAs if and only if an NDA is in accordance with the wish and preference of the relevant employee. Furthermore, the Amendment stipulates that the employee in question must be offered independent legal advice (whose costs are paid by the employer) [LM3] and must not be coerced into giving their assent.[LM4] The Bill equally contains measures for the protection of the public interest and the guarantee that any NDA which is freely entered into shall endure only for a determined and limited period of time.
In the British parliament, the most recent developments vis-à-vis NDA legislation hark back to 6th May 2022. Mrs Maria Miller MP’s Non-Disclosure Agreements Bill has since made no further progress. In Mrs Miller’s initial deposition, delivered in September 2021, she expresses some salient points. “Non-disclosure agreements were invented by lawyers to protect intellectual property,” she discerns, “not to create an atmosphere of secrecy in the workplace”. She argued that her Bill would rail against further perversion of non-disclosure agreements by “[making] it a basic principle of our legal system that no one, however powerful, could buy an employee’s silence if there were allegations of wrongdoing in the workplace”. Her call to action, “legislation is already being considered and put in place in California, Canada, Ireland—the list goes on. We cannot be left behind,” rings all the more true today, given that this Bill has since stalled, and no legislative substitute presented.
Policy[CQ5] makers in both countries know that there is an issue plighting NDAs and have formulated precisely what those issues are. That begs the question why effective and carefully targeted legislation to tackle such issues has not been a point of greater focus for their respective governments and bodies politic. Independent campaigns against non-disclosure agreements do exist, such as Can’t Buy My Silence, which has recently managed successfully to lobby for novel legislation which will interdict “all higher education providers from entering into NDAs with staff members, students or visiting speakers in relation to complaints of sexual misconduct, abuse, bullying, harassment or discrimination”. In conclusion, it can be said that although progress is being made on this front, many would assert that more needs to be done — and with greater speed — to spare employees and workplaces from the pernicious effects of misused NDAs.
Alex Beckett, Legal Intern at Legal IslandThis article is correct at 05/07/2023
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