Non-Disclosure Agreements: UK Law and Debates

Non-Disclosure Agreements – or NDAs – have been in the news lately.  But why?  What are NDAs and why are they considered controversial, are they really so bad?

Litigation Partner, David Turner, looks at NDA’s and these issues.

Non Disclosure Agreements

What is an NDA?

NDAs are sometimes known as “gagging orders”; in legal practice they are usually described as “confidentiality clauses”.  In employment law they routinely form part of Settlement Agreements.

When have they been used?

Disgraced film mogul Harvey Weinstein used them to keep alleged victims quiet.  They have also been used in the House of Commons – figures show that the House of Commons spent more than £2.4 million through NDAs over the last five years in relation to settling claims of workplace bullying.

If someone breaches a NDA – by say speaking out or threatening to speak out – after signing a contract saying they would stay silent – then they break a contract which leaves them open to being sued.  And if a company, or an individual, thinks the NDA is going to be breached, it can apply for an injunction.

This is what Sir Philip Green tried to do to prevent his name being circulated by the The Telegraph in connection with allegations of sexual harassment.  And this can be serious, because if someone breaches an injunction, that could be a contempt of Court and could lead to a prison sentence for the person who breaches the injunction.

Are non-disclosure agreements legally binding?

Non-Disclosure Agreements ( NDAs) have been in the press recently.  There are those who say they are an agreement like any other agreement and are legally binding and should be enforced by the Courts accordingly.  The Counter argument is that an NDA should not be legally enforced if the underlying aspect of the non-disclosure is grossly unfair or morally wrong.

It is therefore perhaps not surprising that there has been growing concern over the use of NDAs.  They started as simply legal agreements making up part of a Settlement Agreement between two parties or to allow trade secrets to be kept private.  They are also regularly used in the commercial and business world in the early consultation period between the parties in the sphere of mergers or acquisitions where one party is provided with sensitive financial information.

However companies soon realised that NDAs could be deployed in employment disputes to settle claims in private and therefore seek to retain their reputations.  Two years ago for example it was revealed that a former youth footballer at Chelsea FC, who was sexually abused by a coach in the 1970s, had received a secret pay out from the club’s owners but only on the condition that he could not talk about the abuse.  To give Chelsea its credit, they later ignored the NDA and allowed the individual to go public with what had happened.

This growing controversy over NDAs means that the legal profession and indeed the government are looking at considering a ban on NDAs, or at least prohibiting gagging clauses in relation to allegations of workplace sexual harassment.  But NDAs cannot stop people reporting illegal acts; reporting them to the police could not be prevented.  It is a grey area – but one which really must be addressed.  NDAs are widespread and almost all employment Settlement Agreements contain NDAs preventing employees speaking out about various matters.

Not all NDAs are bad 

We suspect the issue may have some mileage still in it.  And not all NDAs are bad or wrong; many commercial disputes are best settled by money and silence.  But when the underlying matter that a party is trying to keep silent is controversial (because it say relates to allegations of sexual abuse) then the NDAs become more difficult to defend.

Please contact our team if you would like further and more specific advice on these issues.