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Employers Remain Uncertain About Correct Use Of NDAs – Whistleblowing



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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.

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