NDAs in cases of workplace sexual harassment

NDAs are commonly used in settlement agreements in the UK and particularly so in cases of workplace sexual harassment.

However, the problem with NDAs is that:

• They silence victims and prevent them from speaking about their experiences, discouraging others from coming forwards.
• They are usually imposed by those in positions of power (such as employers) on vulnerable individuals (employees or victims), making genuine and proper negotiation of them difficult.
• They prevent accountability and stop boards and shareholders from fully understanding their culture.

Parliamentary Interest

In 2018, the UK Parliament held an inquiry into the use of NDAs in cases of workplace sexual harassment cases, following the publicity that followed from the Harvey Weinstein allegations and the use of NDAs to protect serious perpetrators of sexual harassment.

The enquiry led to a number of recommendations – but not for an all-out ban, probably influenced by the fact that the body representing employment lawyers in the UK, the Employment Lawyers Association, said that 95% of their members didn’t support a ban.

SRA Warning Notice

As a result of those recommendations, the Solicitors Regulatory Authority (the SRA) issued a Warning Notice to solicitors about the use of NDAs, saying solicitors had a duty not to take unfair advantage in using NDAs and that it would be improper if NDAs sought to prevent:

• reporting an offence to a law enforcement agency
• co-operating with a criminal investigation or prosecution
• reporting to a regulator
• whistleblowing
• making any disclosure required by law
• speaking to professional advisers, such as legal and medical advisors.

Therefore, going forward, solicitors had to ensure that where presenting or advising on an NDA, reporting in any of those circumstances was excluded and a solicitor would be in breach of their regulatory duties if they failed to ensure this.

However, concerns came to light that despite that warning notice, NDAs were still being used inappropriately and in the resulting investigation, the SRA found that only a quarter of firms they investigated had ever questioned a client on whether inclusion of an NDA was appropriate and found the vast majority were using templates to draft NDAs.

As a result, they issued further guidance – NDAs should not be used routinely: A solicitor should consider carefully if an NDA is necessary given the specific circumstances of the case; and if it is, it should be tailored to the individual, noting they are often vulnerable.

Why are NDAs still being used?

NDAs still almost always appear in first draft settlement agreements and are usually made a pre-requisite to settlement, most especially in sexual harassment cases. Given the SRA Warning Notice, what is the reason for that?

The UK Employment Tribunal system

• Sexual harassment claims in the UK are brought before the Employment Tribunal, where the legal costs regime is that each party bears its own costs. Whilst that was intended to allow a risk-free regime to allow employees to bring claims without the fear that they would be on the hook for the employer’s legal costs if they lose, the reality is that it means that fighting a claim to the Employment Tribunal with legal representation is completely out of the question for most employees.
• Compensation for sexual harassment in the UK is not punitive – the median award last year for sex discrimination claims was £11k and the largest element is usually the financial loss. For an individual who leaves employment but who secures alternative employment quickly, they will have little financial loss. The claim is worth even less for those who remain in employment. This means that for most individuals, the legal costs of pursuing a claim will be far more than the likely award.
• When a claim is lodged, it is only the fact that a sexual harassment or a sex discrimination claim has been lodged and against whom that appears on the public record. The facts of the claim are usually confidential until the case goes to a full hearing (unless leaked beforehand).
• The Employment Tribunal system has backlogs, often taking two years for a case to get to a hearing.

Therefore, the stark reality is that whilst employers don’t like facing a claim of sex discrimination or sexual harassment, most know that due to the time it takes to get to court, the cost of legal fees, the final award and the stress for the individual, many employees won’t do it. So, it is actually the ability to keep it confidential that is often the reason for a case to settle early, or even at all. Without the ability to include an NDA in a settlement agreement, employers may be more likely to wait to see if a case really is going to the tribunal or to a hearing, before deciding to settle it – and that would mean that for all those without the ways or means or desire to progress a claim, they would have no remedy.

Whilst NDAs can clearly give rise to problems as set out above, particularly when protecting a serial, senior perpetrator, the system in the UK is such that there may be unintended consequences of banning NDAs in all cases if the result is that fewer cases are pursued and fewer will settle.

Appropriate use

There are also many cases where confidentiality feels more justified. For example, where a misplaced remark accidentally oversteps a line, where the incident in question involves two individual junior employees, where the victim genuinely wants confidentiality, or where the validity of the complaint is genuinely contested by the employer. A confidential settlement can allow both parties to move on without an admission of liability.

If they aren’t to be banned, can their use be reduced?

If employers are to be convinced not to insist on NDAs – without a legal ban on doing so – they would need to see a risk in including them or an advantage of not including them.

Breaking NDAs

There is a growing movement towards breaking NDAs, particularly where there is a critical mass of victims. And where that happens, the reputational damage is massive if it comes to light that NDAs were used to cover up the actions of an abuser, for example in the case of Mohammed el Fayad and Harrods.

In a recent decision, the UK’s Supreme Court said that breaching NDAs may be lawful if doing so in the public interest.  So, the question is, how many complaints of sexual harassment does it take for it to be in the public interest to make them void? Employers should certainly be thinking twice when using an NDA where a perpetrator has been protected before – but could that even extend to one case of very serious sexual abuse or abuse by a high-profile individual?

Model employers

But on a more positive note, the best employees want to work in an organisation that not only values diversity and inclusion, but also one that properly protects its employees, and is able to put its hands up when they fail to do so. An organisation that is confident that it does that, can be confident enough not to need NDAs. If introduced as a policy, it shows a level of transparency and progressiveness and can be a tool for recruitment and retention.

That could be the gold standard that all employers are aiming for.

If you have questions or concerns about the use of NDAs in workplace sexual harassment cases, please contact Julie Morris.