Law Society warns that use of NDAs must be in the public interest
The Law Society has published guidance confirming that solicitors involved in drafting ‘non-disclosure agreements’ (“NDAs”) within employment settlement agreements (also known as ‘severance agreements’) must take into account the public interest if there is a conflict of principles.
The new guidance entitled “Non-disclosure Agreements and Confidentiality Clauses in an Employment Context” confirms that when drafting settlement agreements solicitors should, when taking instructions from clients and drafting the agreements, consider wider public policy issues of public interest if the agreement intends to prevent an employee from disclosing sensitive information (such as, for example, allegations of sexual harassment).
The publication of the guidance follows the controversy that emerged last year regarding firms of solicitors drafting settlement agreements that prevented the relevant employee from disclosing to third parties that they had been sexually harassed at work. It follows on from SRA guidance published last year warning solicitors about potential breaches of the SRA Code of Conduct that could result from failing to suitably take into account the public interest when drafting settlement agreements.
The Law Society’s guidance reminds solicitors that, when drafting settlement agreements, whether for the firm or for a client, they should consider whether any confidentiality clauses in the agreement are ‘appropriate and lawful’ clauses seeking to protect trade secrets or prevent the details of a dispute being made public or, alternatively, whether it seeks to prevent the employee from disclosing an ‘unlawful act’.
The guidance also confirms that “‘It is unlikely to be legitimate to ask a person to sign a [settlement agreement] in which they agree not to disclose an unlawful act that has not yet happened, as the chances of such an agreement being legally enforceable are slim.”
Chris Hadrill, the partner in the employment department at Redmans, commented on the guidance: “Confidentiality clauses in settlement agreements serve an important purpose, in that they essentially ‘put a lid’ on the facts and circumstances of a potential or existing dispute between an employer and an employer. Although this guidance is welcome, the Employment Rights Act 1996 already prevents employers from seeking to ‘gag’ employees from disclosing certain types of behaviour in the workplace to the authorities, to their lawyer, or direct to the employer.”