NDAs: out of the shadows and into the spotlight

Confidentiality or non-disclosure agreements (NDAs) are regularly used in business to keep matters such as financial information and sensitive trading data out of the public domain. In most M&A transactions the parties will enter into an NDA so that information on a target company can be shared with potential buyers without the worry that it may be misused or fall into the wrong hands.

But NDAs, and how they are being used, have been in the media spotlight following the revelations about their use in sexual harassment claims across many industries. The widespread nature of harassment claims, and social media movements such as #MeToo, have given victims the confidence to come forward and speak out despite these ‘gagging clauses’.

Warning to lawyers preparing NDAs

There is very little regulation governing the use of NDAs and the Solicitors Regulation Authority (SRA) is concerned that they may be being used to silence victims and prevent them from reporting harassment to the relevant authorities. A prime example of this is an agreement entered into by Zelda Perkins. Perkins left her role at entertainment company Miramax after she claimed Harvey Weinstein had sexually harassed a colleague of hers. She was required to sign an NDA produced by a law firm which, amongst other things, required her to use her “best endeavours” to limit what she said in any criminal case involving Weinstein. (It should be noted that Weinstein has denied the allegations made against him).

The law firm behind the NDA has been heavily criticised. When evidence on the subject was given to the Women and Equalities Committee the chair, Maria Miller, suggested that “they might not have been working within legal constraints”. Miller also claimed that the way the NDA limited Perkins’ disclosure “might be perverting the course of justice”.

This alleged misuse of NDAs has prompted the SRA to issue a warning notice highlighting a number of concerns around their use and how this could be a breach of the principles in the SRA’s Code of Conduct by the lawyers preparing them.

The warning notice reminds lawyers that they must not use NDAs to try and deter someone from reporting sexual harassment to the proper authorities or from co-operating with a criminal investigation. In addition, NDAs should not be used as a way of improperly threatening litigation against someone (Perkins said she thought she would go to jail if she breached the NDA) and anyone who signs an NDA should not be prevented from keeping a copy (Perkins was not allowed to keep a copy of the NDA she signed with Miramax).

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