Non-disclosure Agreements – What are they and why are they in the news?

What are they?

Non-disclosure agreements (‘NDAs’) or ‘confidentiality agreements’ are used where either one or more parties are disclosing confidential information to another for general commercial purposes. In a mutual NDA, the rights and obligations of both parties are mutual in an attempt to create a balanced view. The main purpose of NDA’s in commercial matters is to prevent the receiving party misusing the other party’s confidential information, which could be anything from a trade secret, a new idea or invention.

In practical terms, NDAs are used much more widely, including in the settlement of potential employment claims (through ‘settlement agreements’) and as a means of ‘gagging’ potential claimants from bringing a claim. These non-disparagement clauses require the parties to agree not to make derogatory or adverse statements about each other, protecting from reputational damage.

Why are they in the news?

On 23 October 2018 the Court of Appeal dealt with ABC and others v Telegraph Media Group, granting a ‘leading businessman’ an interim injunction, preventing the newspaper from publishing his identity and details of an eight month investigation into alleged sexual harassment and racial abuse by him of his employees. 

The newspaper has claimed the businessman used NDAs on at least five occasions to pay off employees with substantial sums to prevent their accusations coming to light.

This in turn has caused a media and public outcry. The Harvey Weinstein scandal showed how he used ‘gagging’ clauses in legal agreements to prevent allegations of sexual harassment becoming public knowledge.

The Prime Minister, Theresa May, said on 24 October 2018:

“Non-disclosure agreements cannot stop people from whistleblowing but it is clear some employers are using them unethically.

The government is going to bring forward measures for consideration for consultation to seek to improve the regulation around non-disclosure agreements and make it absolutely explicit to employees when a non-disclosure agreement does not apply or cannot be enforced.”

What does the future hold for NDAs?

There will always be a legitimate commercial requirement for NDAs as confidentiality is a crucial element of business transactions. Similarly, in an employment setting, such agreements are useful for reaching mutual settlement of disputes. However, the use of NDAs in employment may become more regulated.

The law currently imposes several requirements aimed to protect employees, including a legal requirement for employees to obtain independent legal advice before signing settlement agreements. These measures aim to protect individuals from signing away their statutory employment rights without understanding what they are doing and to balance the unequal bargaining power between employers and individual employees. An NDA can be challenged if it was procured by bullying, harassment or undue pressure. It also cannot be used to prevent whistleblowing – making protected disclosures to relevant bodies.

If you are unsure on whether you need an NDA; are considering entering into one or are already party to one, we can advise you on your position. Please get in touch us on 0203 146 3549 / [email protected]

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