Non-disclosure agreements, commonly abbreviated as NDAs, are alternatively known as confidentiality agreements and sometimes referred to as “gagging orders.” These legal instruments are frequently utilized by employers to safeguard sensitive information about themselves or their businesses from becoming public knowledge.
Non-disclosure agreements play a pivotal role in both settlement agreements and employment contracts within the professional sphere. In recent years, there has been a surge in high-profile cases where individuals breach these agreements and divulge confidential information.
In this updated version of our 2019 blog post on Philip Green and the implications of gagging orders, we delve into the intricacies of non-disclosure agreements, examining their merits and demerits for employees who become signatories.
For the purposes of this discussion, we will adhere to the term ‘non-disclosure agreement,’ although it essentially encompasses the same concept as ‘confidentiality agreement’ or ‘gagging order.’
Understanding Non-Disclosure Agreements
Non-disclosure agreements in employment law primarily pertain to confidentiality or gagging clauses found within settlement agreements and employment contracts. In this context, we will emphasize their relevance in settlement agreements, which are comprehensively expounded upon in our main page on settlement agreements.
In a nutshell, settlement agreements outline the compensation provided to you by your employer as redress for mistreatment during your employment. They also establish restrictions on your post-employment activities, including the disclosure of certain types of confidential or sensitive information, the focal point of this discussion. In exchange, you commit to a quiet departure from your employment, refraining from legal action against your employer or publicizing allegations against them.
Distinguishing Non-Disclosure Orders from Non-Disclosure Agreements
While ‘non-disclosure order’ is sometimes loosely equated with a non-disclosure agreement within a settlement agreement or employment contract, there are substantial differences between the two:
Non-Disclosure Orders or Injunctions Obtained Through Legal Proceedings
Non-disclosure orders or injunctions pursued through legal avenues are court orders secured by individuals or organizations. These orders enlist the courts’ authority to either prevent or compel someone to take certain actions.
These court orders are often employed to prohibit individuals from publicly divulging sensitive or confidential information pertaining to a business or its practices, which accounts for the popular term ‘gagging order.’ Typically, employers utilize such injunctions against employees, both current and former. These injunctions can also be employed to compel someone to surrender information on sensitive matters concerning an employer or business that may be in their possession.
Non-Disclosure, Confidentiality, and Gagging Agreements
Non-disclosure, confidentiality, or gagging clauses can be embedded within broader legal agreements. The signatory undertakes not to publicly disclose information regarded as sensitive, confidential, or detrimental by the individual or organization crafting the agreement. These clauses are usually negotiated between employers and employees and may be integrated into an employment contract upon initial employment. They can also feature in a settlement agreement formulated in the aftermath of a dispute with your employer. These clauses are primarily designed to safeguard legitimate business interests but are not intended to stifle reports of sexual harassment, discrimination, or whistleblowing at work.
Instances When You Might Be Asked to Sign a Non-Disclosure Agreement
Your employer may request that you enter into a non-disclosure agreement in exchange for a financial settlement. Typically, this is employed to prevent you from making information public that your employer believes could tarnish their reputation or harm their business.
In such cases, you receive a financial settlement in return for abstaining from taking the dispute to court or publicly discussing the matters covered by the NDA. You may also be obligated to maintain the confidentiality of the agreement’s terms and the reasons behind its formulation.
Illustrative Examples of Non-Disclosure Agreements and Orders in the Media
- Harvey Weinstein: The American film producer, Harvey Weinstein, faced allegations of sexual assault by some of his female employees. NDAs prevented these employees from publicly disclosing his criminal behavior. Nevertheless, one of Weinstein’s former assistants breached the terms of her agreement and openly discussed her experiences, ultimately leading to Weinstein’s imprisonment in 2020.
- Sir Philip Green: The former head of the Arcadia retail group, Sir Philip Green, including brands like Topshop and BHS, initiated legal action in the form of a non-disclosure order against the Daily Telegraph. The newspaper had uncovered allegations of sexual and racial harassment made against him by his employees, who had allegedly received substantial payouts to keep their allegations private. Sir Philip Green abandoned the legal action, reportedly to avoid further revelations and embarrassment. Despite facing hefty legal expenses, he was never prosecuted for the allegations against him.
The Advantages of Signing a Non-Disclosure Agreement
When you sign an NDA or confidentiality agreement as part of a settlement agreement, you typically won’t receive more money than you would through an employment tribunal or other legal proceedings. However, what you do attain is a level of certainty. You receive an agreed-upon settlement payment, enabling you to move forward with your life.
Navigating Uncertainty in Litigation
In the context of a tribunal or court case, there is always the inherent ‘litigation risk’—the possibility of losing the case. Most instances of sexual harassment or racism are not documented in writing, making them challenging to substantiate. By entering into an NDA as part of a settlement agreement and securing the financial settlement, you effectively mitigate this risk.
Evasion of Public Scrutiny
Another advantage of non-disclosure and confidentiality agreements is that they spare you from the public scrutiny often associated with cases that wind up in a tribunal or court of law. Many individuals prefer to avoid the protracted and often intrusive legal processes that result in public exposure and accountability for their employers. If you fall into this category, signing an NDA is a preferred alternative to protracted legal proceedings.
Covering Legal Expenses
Notably, legal aid for employment law has been considerably reduced. Therefore, it is imperative to consider the financial implications of engaging in a tribunal or court case if the outcome is unfavorable. Non-disclosure agreements can offer financial security in such cases.
Mitigating Reputational Fallout
For individuals in the public eye or when the party in question is a well-known figure, any legal case is likely to attract significant media attention. In such scenarios, individuals may be forever associated with allegations of sexual harassment, which could adversely affect their personal and professional lives. By choosing an NDA, individuals can protect their privacy and reputation.
The Implications of Breaking a Non-Disclosure Agreement
What if you sign a non-disclosure or confidentiality agreement and subsequently decide you regret having done so? Suppose you wish to reveal the truth about the events covered by the agreement. In this case, the individuals or entities who provided the settlement money when the agreement was signed must consider whether to take legal action against you for violating the terms.
The threat of legal action alone often serves as a deterrent, prompting individuals to remain silent. Public disclosure could lead to further reputational damage for those pursuing legal action, as their actions would be subjected to public scrutiny.
Role of a Lawyer in Drafting Non-Disclosure Agreements
It is imperative to note that making an NDA legally binding within a settlement agreement requires independent legal advice. Employers cannot compel you to sign one without your informed consent. Your attorney serves as a third signatory and also provides guidance on your rights, the implications of the agreement, and the adequacy of the financial compensation offered in light of your circumstances.
Critical Information About Non-Disclosure and Confidentiality Agreements
Before signing a non-disclosure or confidentiality agreement, whether as part of a settlement agreement or as a standalone agreement, it is essential to be aware of the following:
- Protection Under the Public Interest Disclosure Act 1998: Certain rights under this act cannot be waived in a settlement agreement.
- Reporting Potential Crimes to the Police: An NDA cannot be used to prevent you or others from reporting potential criminal activities to the authorities.
- Whistleblowing Protections: Employees cannot be prevented from whistleblowing in cases involving illegal practices or providing information to public authorities or regulators.
- Requested Copy of the Agreement: Upon request, you are entitled to receive a written copy of the non-disclosure clause/agreement, accompanied by a reasonable amount of time to seek legal counsel.
Concluding Thoughts on Non-Disclosure Agreements
The presence of non-disclosure agreements and their incorporation into settlement agreements has brought attention to the unethical conduct of certain employers. These employers have engaged in objectionable behavior and subsequently induced their employees to maintain silence through substantial cash settlements.
Campaigns like #metoo have played a significant role in raising awareness of such practices on a global scale and holding unscrupulous employers accountable for their actions. However, it is important to consider that an outright ban on non-disclosure and confidentiality agreements may not be feasible without a suitable incentive or alternative in place.