I was quoted in last week's Sunday Times (22 May 2022), in the lead article – NHS ambulance service doctored documents to cover up truth about deaths. The report was an investigation into alleged failings by the North East Ambulance Trust (NEAS) which led to patient deaths. It was revealed that earlier this year, managers at the NEAS asked some members of staff to sign non-disclosure agreements (NDAs) in return for payments of more than £40,000. These agreements prevented the staff members from repeating their concerns about poor practice — even to the police — unless there was "a significant change in the nature of the concern".
Following the revelations concerning Harvey Weinstein and the #metoo movement, the use of NDAs came in for much criticism, especially when they were attached to Settlement Agreements for departing employees. In July 2019, Business Minister Kelly Tolhurst announced plans for new legislation intending to prohibit NDAs from being used to prevent people from disclosing information to the police, regulated health and care professionals, or other professionals, such as doctors, lawyers, or social workers. The Non-Disclosure Agreements (No 2) Bill was introduced by Conservative MP, Maria Miller in September 2021 and is currently awaiting its second reading in the House of Commons.
Due to the silence around the issue over the past two years or so, employers who approach us are unsure as to the law around drafting, negotiating, and enforcing NDAs. In this article, I will set out the current regulatory guidance.
What is an NDA?
An NDA, also known as a Confidentiality Agreement or, colloquially, a 'gagging order', is intended to be a legally enforceable contract. One party to the NDA will agree to disclose confidential information to the other party, who in turn, agrees not to divulge the information to anyone else. Alternatively, one party agrees to keep certain things concerning the other party confidential in exchange for a benefit.
What types of NDAs are under scrutiny?
Originally, NDAs were developed to protect trade secrets, and are still widely used for this purpose today. These types of NDAs do not pose a concern. However, the Solicitors Regulation Authority (SRA) has issued warning notices regarding NDAs which are designed to:
- Make a person feel they cannot complain to a law enforcement agency or industry regulators about conduct that would otherwise be reportable.
- Result in a failure to notify the SRA of misconduct or a serious breach of the Regulator's requirements, including unfair or unreasonable negotiating tactics.
- Use the threat of litigation or other adverse consequences as a means of preventing disclosures of behaviour which are protected by statute, or reportable to regulators or law enforcement agencies.
- Prevent a person from making a protected disclosure under the Public Interest Disclosure Act 1998 (whistleblowing).
- Influence the substance of such a report, disclosure, or co-operation.
- Prevent any disclosure required by law.
- Include or propose clauses known to be unenforceable.
- Use warranties, indemnities, and clawback clauses in a way which is designed to, or has the effect of, improperly preventing or inhibiting permitted reporting or disclosures being made.
NDAs that engage any of the above are considered improper by the SRA and the Regulator can impose disciplinary action on any solicitor who is found to have advised on, drafted, and/or negotiated such an agreement. The SRA has also warned that solicitors who take "unfair advantage of an opposing party, whether unrepresented or represented by a lawyer, professional adviser, litigation friend, intermediary or other third party" may be in breach of their professional obligations.
In February 2020, Acas also published guidance for employers on the use of NDAs. The guidance confirms that an NDA cannot prevent whistleblowing, nor the reporting of a crime to the police. Further examples of situations in which NDAs should not be used include covering up misconduct, avoiding addressing workplace issues, or misleading individuals.
What action should employers take regarding NDAs?
At present, all the guidance around using NDAs to restrict matters from being reported to the police is non-statutory, however, an NDA cannot prevent an employee from making a protected disclosure (whistleblowing), including disclosures related to criminal offences and health and safety concerns. Given that the Non-Disclosure Agreement (No 2) Bill is currently progressing through Parliament and is likely to eventually become law, it is sensible for employers to take steps to review their use of NDAs to ensure that use is compliant with current best practice.
Originally published 25 May 2022
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.