The pitfalls of NDAs in the age of #MeToo

Can the controversial agreements ever survive the public interest test in the era of #MeToo allegations? Here’s the truth about NDAs, writes media lawyer Jennifer Agate

An allegation is made against you by an employee. You deny it, but are advised that to avoid the time, costs and publicity of a tribunal, it is in you and your company’s best interests to enter into a confidential settlement with the complainant. Do you take a risk and pursue vindication in the courts, or enter into the settlement, relying on the confidentiality provisions to protect your reputation?

Non-disclosure agreements have faced widespread criticism since they became synonymous with the accusations brought against Harvey Weinstein, with critics suggesting they ‘enable’ abusers. The controversial documents hit the news again this week when the Court of Appeal granted an interim injunction preventing the Daily Telegraph from reporting on allegations of ‘discreditable conduct’ made by five employees against a senior corporate executive, known in the court proceedings only as ‘ABC’ but subsequently named in parliament. The five employees had all received ‘substantial‘ payments in settlements, with both sides agreeing to obligations of confidentiality.

The documents themselves have become the story, the Telegraph arguing that ‘the public have a right to know when the powerful seek to gag the vulnerable’. The Court took a different view, recognising a public benefit in the enforcement of contracts freely entered into by the relevant parties. Such agreements, the court said, allow the parties to avoid litigation. Confidentiality can protect not just the employer, but also the employee, who may equally wish to keep the matter private.

NDAs have undoubtedly been used in many situations to do exactly as campaigners fear. Yet there are still many occasions where they have a legitimate use and are desired by both parties. To ensure your NDAs stand a chance of surviving the public interest test, you must first ensure that the other party has taken independent legal advice and has entered into the agreement freely, without improper pressure or any other vitiating factor.

Secondly, the agreement must also allow for disclosure of the underlying allegations to the appropriate regulatory or statutory bodies. Any attempt to prohibit such reporting will be unenforceable.

Another point to think about is could the nature of the allegation be genuinely said to contribute to a debate of public interest? A public interest is more likely to be deemed to exist where a criminal offence or serious ethical failing is alleged against a public/authority figure.

Less scientifically, consider the ‘sniff’ test. Does the deal and specifically the confidentiality clause feel fair to the complainant? If not, then be braced for the additional reputational harm that could ensue if the settlement becomes public knowledge.

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In the current case, ABC and the two companies became aware of the threat to confidentiality when they were contacted by the Daily Telegraph, the journalist appearing to have information that could only have been disclosed by persons aware of (and therefore likely bound by) the NDAs. At this stage they needed to make a further decision: how far would they go to protect the confidential information protected by the NDAs.

Even if you can be confident that your NDA will stand up to scrutiny, when considering an injunction application, you must balance the potential reputational gain against the potential publicity around the injunction application itself, should it ultimately fail or its provisions be breached. In the current case, the outrage is such that an MP has followed John Hemming’s example in the Ryan Giggs case and used parliamentary privilege to identify ABC.

As ever, plan. From a reputational perspective, five complaints pose a very different reputational risk to one isolated complaint and call for an independent review of the company’s culture and procedures, together with a pre-emptive crisis management planning comprised of both a legal and public relations strategy.

Most NDAs will contain mutual obligations of confidentiality, so remember too that if the allegations are made public, you may be prohibited from disclosing information you might otherwise have wished to use in your public statements.