Sexual harassment in the workplace Contents

4Clean up the use of non-disclosure agreements (NDAs)

Summary

106.Non-disclosure agreements (NDAs) are used unethically by some employers and also some members of the legal profession to silence victims of sexual harassment, and there is insufficient oversight and regulation of their use. It is unacceptable that victims are scared to speak about their experiences of sexual harassment in the workplace and that those who use NDAs unethically are not held to account.

What is an NDA?

107.A non-disclosure agreement is a contract that contains clauses that restrict what a signatory can say, or who they can tell, about something. These clauses are also known as confidentiality or gagging clauses. Witnesses giving evidence to our inquiry used the term NDA in different ways. We have used it to refer to two different types of agreement that typically contain confidentiality provisions: employment contracts and settlement agreements.

NDAs in employment contracts

108.Employers may ask individuals to sign an NDA before they begin working for them. As the Government Equalities Office (GEO) sets out, “NDAs can form a legitimate part of an employment contract and […] are important to protect trade secrets that could otherwise undermine a company’s competitiveness in the marketplace.”161 We acknowledge that NDAs have a legitimate use in employment contracts, but we are also concerned that they are being used unethically by some employers to prevent damaging stories about sexual harassment from surfacing. Christine Payne of Equity raised her concerns that non-disclosure agreements were being used more broadly in the entertainment sector to say that individuals “should not say anything about anything that goes on either in the casting process or in the workplace”. She told us that such an agreement implied that the individual would not be able to say anything about inappropriate behaviour in a casting session or on set, and that this was creating a “culture of fear and intimidation” for Equity members.162

NDA use in settlement agreements

109.Settlement agreements are described by the GEO as providing “a way to resolve workplace disputes or end a working relationship without the need to go through the cost and stress (for both parties) of an Employment Tribunal hearing”.163 Employment lawyers agreed that NDAs were important to enable victims of sexual harassment to get a settlement from their employer, particularly if the case could not be resolved through the employer’s grievance procedure.164 Indeed, Gareth Brahams, the then Chair of the Employment Lawyers Association, told us that in many cases no settlement would be agreed without a non-disclosure agreement.165 Again, we acknowledge that there is a place for NDAs in settlement agreements; there may be times when a victim makes the judgement that signing an NDA is genuinely in their own best interests, perhaps because it provides a route to resolution that they feel would entail less trauma than going to court, or because they value the guarantee of privacy. However, we have grave concerns about their unethical use.

A chilling effect? The silencing of victims

110.We are concerned that NDAs are being widely used to silence victims of sexual harassment in the workplace and to prevent cases being brought into the public eye for fear of bad publicity. However, the confidential nature of these agreements makes it difficult to estimate out how many there are out there and to gauge how ethically they are being used. Barristers at 11KBW and Doughty Street Chambers have summarised the main risks from unethical use of NDAs in silencing victims as being that individuals will not report serious wrongdoing to the police; will feel compelled not to assist with relevant law enforcement investigations or prosecutions; and will feel unable to speak openly and in the public interest about serious wrongdoing, thus inhibiting public awareness and debate.166

Box 6: Non-disclosure agreements: individuals’ experiences

“Non-disclosure agreements are sometimes used as a threat against employees. I was told that I must sign a settlement agreement for no money, or I would be ‘bad-mouthed’, not given a reference, and my new employer would be called and told about the harassment claim.”

“The encouragement of signing the settlement agreement was made at the end of the day whilst I showed clear signs of anxiety, despair and hesitation in signing all my rights away.”

“Re the non-disclosure agreement, my solicitor […] said in her view [the employers] were purposely trying to ramp up costs to add pressure on me. It was costing an amount beyond my means. I had no job. I was ill. […] I had no choice but to agree to sign.”

Written evidence from members of the public167

“Attempted to take the company to a tribunal. They made a settlement the evening before but I had to sign an NDA. My solicitors agreed to this but I wanted justice not to be gagged. I have never worked within a company since and have arranged my life to be self-employed.”

Individual’s story from submission by 38 Degrees168

111.We have heard deplorable examples of how NDAs have been used to threaten, bully and silence victims of sexual harassment. Shockingly, this unethical treatment has, in some cases, been facilitated by members of the legal profession. Two high-profile cases in particular—the Presidents Club Dinner and the Zelda Perkins case—demonstrate how NDAs in employment contracts and settlement agreements can be used unethically and potentially unlawfully.

The Presidents Club Dinner

112.In January 2018, the Financial Times reported that 130 hostesses had been recruited to work at a charity event—the Presidents Club Dinner—which was “attended by 360 figures from British business, politics and finance and the entertainment” sector. The report described how hostesses were “groped, sexually harassed and propositioned” by dinner guests and how the agency that had employed them, Artista, “had an enforcement team, made up of suited women and men, who would tour the ballroom, prodding less active hostesses to interact with dinner guests.”169 It also reported that when the hostesses had arrived at the venue to begin work, they had been required “to sign a five-page non-disclosure agreement about the event” and that they “were not given a chance to read its contents, or take a copy with them after signing.” The Law Society has questioned whether such an agreement would be legally binding, but has also pointed out that as its main purpose would be to intimidate those who signed it, “it is unlikely that the legality of the NDA would be tested”.170

The Zelda Perkins case

113.We heard compelling evidence from Zelda Perkins about the very stringent NDA that she signed in 1998 when she reached a settlement agreement with her former employers, film producer Harvey Weinstein and film production company Miramax. She resigned when her complaint of sexual harassment was not resolved by her employer, stating:

I had to resign from the company, citing myself as constructively dismissed due to Mr. Weinstein’s inappropriate behaviour towards me throughout my employment and the attempted rape of my colleague. Our expectation was to prosecute Mr. Weinstein in seeking justice but due to the advice we were given at the time and the absence of any HR framework in the company, my colleague and I were told that we had no option other than to enter into an agreement with Mr. Weinstein and The Miramax Corp., accepting a financial damages settlement and signing a stringent and thoroughly egregious non-disclosure agreement.171

114.Ms Perkins described feeling pressured during the process of reaching the agreement, and feeling “unhappy with the entire process and the entire agreement”.172 One of the most shocking aspects of the agreement was that Ms Perkins was not allowed a copy of it, and was permitted only to view it where it was held at a law firm’s office. Legal experts told us that they would consider it “wrong” and unethical not to provide a copy of an NDA to all parties who had signed it and that they would never advise a client to sign such an agreement.173

115.Other aspects of the NDA signed by Ms Perkins also caused us considerable concern. She gave us an overview of the restrictions, stating:

It is a morally lacking agreement on every level. There are clauses in there that preclude me and my colleague from not only speaking to our friends, colleagues and family about our time at Miramax and what happened, but speaking to any medical practitioner, any legal representative, the Inland Revenue, an accountant or a financial adviser. We can speak to those people, as long as they sign their own non-disclosure agreement before they can enter into any conversation with us about anything. However, even within that, once they had signed that, we were still under pressure to not name anybody with whom any of the events happened. […] It does not say specifically that we cannot speak to the police, but we have to use our best endeavours, and we have to assist the company in keeping a positive environment.174

116.We were particularly struck by Zelda Perkins’ evidence that she feared she would “probably go to jail” if she broke the terms of the agreement.175 Professor Richard Moorhead commented that this was not surprising, as it was not uncommon for lay participants in civil and family justice to assume that they are at risk of prison when they are not.176 In addition, we have been contacted by individuals who were too fearful of the potential repercussions of breaking an NDA to give evidence to this inquiry, even anonymously.

117.We were also struck by Ms Perkins’ evidence about the effects that the case and the NDA had on her wellbeing and career. She described feeling “emotionally and psychologically drained, exhausted and disillusioned, having lost total faith in the legal system” finding it “impossible to find employment in the film industry” and “with no option other than to leave the UK and attempt to reconstruct life” elsewhere.177

Use of unenforceable and unethical clauses in NDAs

118.Any NDA clause designed to prevent a worker from making a disclosure in the public interest—also known as whistleblowing or making a protected disclosure—would be void under section 43J of the Employment Rights Act 1996. However, an individual who has signed an NDA containing such a clause might not be aware that this part of the NDA could not be enforced if it was breached. Even if they suspected that it was not enforceable, they would probably need legal advice to work out whether they were entitled to protection under whistleblowing laws, which are set out in the Public Interest Disclosure Act 1998 (PIDA).

119.Under PIDA, protected disclosures include disclosures about malpractice, breaches of the law, miscarriages of justice, dangers to health, safety and the environment, or the cover-up of any such behaviour. If an individual is victimised or dismissed for making a protected disclosure, they can bring an employment tribunal claim for compensation. An individual who wanted to make use of these whistleblowing protections would need to be sure that the law applied to them and the circumstances in their case. Individuals who can make protected disclosures include employees, police officers, NHS staff and other types of worker. For the disclosure to qualify as protected it would have to be made to a “prescribed person” as listed in the Act. C M Murray LLP outlined some of the organisations and postholders who qualify as prescribed persons and suggested that the list should be expanded to increase protection:

The list of prescribed persons includes the Independent Police Complaints Commission, police and crime panels, the National Crime Agency, elected local policing bodies, the FCA, Secretary of State for Business, Energy and Industrial Strategy, the Prudential Regulation Authority and a number of other regulatory bodies. […] However, it is notable that the list does not include the Solicitors Regulation Authority, the police, the Institute of Chartered Accountants in England and Wales, Public Concern at Work, ACAS or the Equality and Human Rights Commission. […] These omissions limit the scope of the legislation and we believe that the list should be extended to ensure the maximum protection for workers.178

Gareth Brahams told us that the law on protected disclosure was “quite complicated” and “should be reformed to make it clear—as a matter of public policy—that going to the police would never be a breach of an agreement that would be enforceable”.179

120.We were concerned to hear from Francesca West of the whistleblowing charity Public Concern at Work that it is not uncommon for her charity to find potentially unenforceable confidentiality clauses in settlement agreements. She described the confusing and potentially conflicting wording and legalese sometimes found in such agreements:

We run an advice line for UK workers. […] What I would describe as a classic situation […] is someone calling, telling us that they cannot tell us what has been happening because of the settlement agreement. We will ask them to forward that agreement so we can take a look at it. What we would normally see is quite a heavy-handed confidentiality clause on one page and then, maybe a few pages later, a reference to part IVA of the Employment Rights Act and that ‘nothing in this agreement shall affect your rights under that Act’. To most individuals that wording is totally opaque, but it is referring to the whistleblowing provisions and the anti-gagging section as well. A lawyer may feel that they have covered their obligation to flag that, but an individual, particularly a litigant in person, who is looking at these two competing statements is quite understandably totally confused as to whether or not they can go on to make a disclosure.180

Ms West also suggested that many disclosures about sexual harassment would qualify as protected disclosures, but that the current design of whistleblowing legislation was “unhelpful for the vast majority of individuals.”181

121.Employment lawyer Andrew Taggart agreed that there was “a lack of understanding on the part of the individual as to what the real effect of the non-disclosure or confidentiality provision is.” He went on:

most of them have never heard of the legislation. It is not spelled out sufficiently clearly in the documentation, so that they would know that it does not prevent them from going to a regulatory authority or indeed taking legal advice, as many of them may think. I have had experience on phone lines acting for charities where the individual says, ‘I don’t know if I can even speak to you about this matter. I have signed up to a confidentiality agreement’.182

Mr Taggart also suggested that the Government, Acas and charities could do more to communicate what the effect of non-disclosure and confidentiality agreements really is and that there are real limitations to them.

Regulation of members of the legal profession

Unethical practice

122.We have been particularly concerned by the evidence we have heard about members of the legal profession facilitating the unethical use of NDAs. Ms Perkins described how the agreement that she signed was reached following “a week of aggressive interrogation and negotiations […] carried out by representatives of Allen and Overy and the Miramax lawyer from the U.S. office”. She went on:

This was a bewildering experience that was akin to being under siege with grueling sessions lasting many hours, on one occasion running from 5pm until 5am. Enormous amounts of pressure were put on us and our representatives which, considering we were the victims of the situation, was inappropriate, intimidating and frightening.183

123.We also heard from Mark Mansell, a lawyer at Allen and Overy who had been directly involved in the Zelda Perkins case as a representative for Harvey Weinstein and Miramax. We were unable to discuss that case in detail because of client confidentiality, but we were able to ask about the ethics of including some of the most restrictive clauses in that NDA. When we asked how common it was for people who signed NDAs not to receive copies of them, Mr Mansell admitted that it was “extremely rare”.184 We also asked about the ethics of using an NDA to require an individual to limit the scope of disclosure as far as possible in a criminal process. Mr Mansell drew a distinction between answering specific questions, which he stated that the individual should “definitely” be able to do, and “information that somebody could voluntarily disclose that they do not necessarily need to”.185 Professor Richard Moorhead likened this approach to the children’s game battleships:

As a strategy for dealing with interviews this reminds me of the children’s game Battleships; the police can guess what might be relevant but [Zelda] Perkins cannot volunteer for them the location of what they seek. It points to the first problem with this approach: it suggests that the NDA was designed to shape the evidence that would be presented to the police—or others engaged in lawful legal process—governed by ideas of relevance influenced by [Allen and Overy’s] clients.186

124.Professor Moorhead suggested that discouraging the voluntary disclosure of evidence in a criminal process could be seen as perverting the course of justice. When we asked Mr Mansell if provisions on limiting disclosure could be seen as perverting the course of justice, he replied that he could “see how people might view it that way”.187 When pressed on whether he regretted having drawn up the NDA in that way, he stated:

In terms of that particular provision, I do not believe that it would have prevented Ms Perkins from participating in a criminal process. It required certain steps to be gone through. If I were dealing with that today, I would make it clearer that the ability to participate in a criminal process was not in any way restricted.188

125.Ms Perkins’ case has been described as “extreme” by Gareth Brahams, who urged caution when considering how the law should be changed to address concerns about NDAs, stating that there “would be very severe unintended consequences if you were going to use that as your standard case for sexual harassment”.189

126.We accept that some of the clauses in Ms Perkins agreement were unusual and that current whistleblowing protections were introduced after her NDA was signed. However, there is ample evidence, not least from the Presidents Club case, to suggest that law and practice around the use of NDAs needs to be tightened. Indeed, in the wake of reports about the Presidents Club case, the Prime Minister said that the Government would look at how to address this issue.190 Justice Minister Lucy Frazer QC MP told us that the Ministry of Justice had been looking at the existing legal framework and that the Department for Business, Energy and Industrial Strategy (BEIS) was looking at whether there are any gaps in employment law relating to NDAs.191

Action by regulators

127.The main regulators of the legal profession are the Solicitors Regulation Authority (SRA) and the Bar Standards Board (BSB). The BSB stated in its written evidence that it had not issued regulatory guidance on non-disclosure agreements but that it was considering doing so. It also set out that when a barrister is involved in drafting an NDA they must abide by the rules in the BSB Handbook, including acting in the best interests of each client, acting with honesty and integrity and not behaving in a way that is likely to diminish the trust and confidence that the public places in them or the profession.192

128.The SRA drew our attention to the guidance it published in March 2018 advising solicitors on the use of NDAs. This included a new Warning Notice on the use of NDAs intended to raise awareness of the risks and to remind law firms and solicitors that potential professional misconduct, including sexual harassment, must be reported to the regulator.”193 However, when we asked the Chief Executive of the SRA, Paul Philip, about the SRA’s enforcement work on improper use of NDAs, he admitted that there was “not very much”, with only three open cases he knew of. He added that in 2016 a solicitor had been disciplined in front of the Solicitors Disciplinary Tribunal for a compromise agreement that sought to stop reporting of particular behaviour to the regulator.194

129.We were particularly disappointed by apparent lack of rigour in the SRA’s approach to investigating whether there had been unethical practice by the lawyers involved in the Zelda Perkins case. Paul Philip told us that the SRA had spoken to Allen and Overy’s compliance officer in November 2017 but had not then taken further action until April 2018, after we had taken evidence in public from Zelda Perkins and Mark Mansell. He stated:

“[W]e spoke to the firm on 28 November last year. We spoke to the compliance officer. They very usefully gave us all sorts of information about the types of procedures you would expect to be in place in relation to this type of thing in a large law firm today, but this matter happened 20 years ago. We decided at that point in time that we would wait to see what further information came to light. Further information subsequently came to light and we opened up a case.195

Conclusion

130.The use of non-disclosure agreements (NDAs) must be better controlled and regulated to ensure that they are not used unethically in cases where sexual harassment is alleged. It is vital that employees have access to information about the responsible and legal use of confidentiality clauses and that lawyers are held to account for using or attempting to use such clauses in an unethical way. We are encouraged that the SRA has issued guidance on reporting sexual harassment and the use of NDAs in sexual harassment cases and hope that the Bar Standards Board and the Bar Council also issue guidance. However, the regulators must also demonstrate that members of the legal profession will face serious sanctions if they sexually harass clients or colleagues or if they misuse NDAs to silence victims of sexual harassment.

131.The Government should legislate to require the use of standard, approved confidentiality clauses. These should include clear, plain English wording setting out the meaning, effect and limits of confidentiality clauses, including a clear explanation of what disclosures are protected under whistleblowing laws and cannot be prohibited or restricted.

132.The definition of protected disclosures and prescribed persons under whistleblowing legislation should be widened to include disclosures of sexual harassment to the police and all regulators, including the Equality and Human Rights Commission and Health and Safety Executive, and to any court or tribunal.

133.The Government should make it an offence for an employer or their professional adviser to propose a confidentiality clause designed or intended to prevent or limit the making of a protected disclosure or disclosure of a criminal offence.

134.Use of provisions in confidentiality agreements that can reasonably be regarded as potentially unenforceable should be clearly understood to be a professional disciplinary offence for lawyers advising on such agreements.


161 Government Equalities Office (SHW0050)

163 Government Equalities Office (SHW0050)

164 Q38; Qq163–164; Qq196–198 [Andrew Taggart]

166 Anya Proops QC, Aileen McColgan, Natalie Connor and Jennifer Robinson (SHW0059)

167 A member of the public (SHW0015); Anonymous Anonymous (SHW0013); A member of the public (SHW0012)

168 38 Degrees (SHW0025)

170 The Law Society (SHW0042)

171 Zelda Perkins (SHW0052)

176 Professor Richard Moorhead (SHW0062)

177 Zelda Perkins (SHW0052)

178 CM Murray LLP (SHW0019)

183 Zelda Perkins (SHW0052)

186 Professor Richard Moorhead (SHW0062)

190Presidents Club: Theresa May ‘appalled’ at men-only gala groping claims”, BBC news, 25 January 2018; “Possible ‘criminal offences’ committed at Presidents Club dinner” Financial Times, 25 January 2018; “Non-disclosure agreement rules to be reviewed after Presidents Club scandal, No 10 says” The Guardian, Politics live with Andrew Sparrow blog, 25 January 2018

192 The Bar Standards Board (SHW0044)

193 Solicitors Regulation Authority (SHW0021)




Published: 25 July 2018