Sir Philip Green

Non-disclosure agreements are nothing new. They were initially used in commercial transactions in order to protect parties in negotiations from the disclosure of commercially sensitive information. It remains the case that businesses which are considering mergers or acquisitions will normally start the process by requiring the interested parties to sign an agreement that is intended to ensure that, in the event that discussions do not lead to fruition, details of the parties, such as their business plans, forecasts and any other confidential arrangements, are not at risk of being leaked. This makes perfect sense, not least from the point of view of data protection.

Their use has become more widespread and they have moved into the sphere of employment law. It is more or less standard for settlement agreements (on the termination of employment) to include clauses which provide that the parties will keep confidential the terms of settlement and the circumstances giving rise to it. In most cases, this suits both parties. In effect, the employee is agreeing a trade off with the employer that, in return for a pay off which avoids the need for protracted, expensive and uncertain legal proceedings, they will accept an enhanced payment on terms which, to borrow a term from divorce law, provides for a clean break.

However, you can’t have missed the furore that has brought such agreements into the news headlines, particularly in the case of retail supremo Sir Philip Green and media mogul Harvey Weinstein. The #MeToo movement has led to a lively public debate about the inequality of arms which tends to accompany such deals and their ability to conceal serious wrongdoing including illegal activities, particularly discriminatory behaviour and, in the more severe cases, the sexual assault of women.

There is an overlap here between civil law, which in this context is concerned with the enforceability of contractual agreements, and criminal activity, the investigation and prosecution of which might, on the face of it, be concealed or suppressed by the signing of such agreements. Another question is whether whistleblowing can be subverted by being effectively bought off?

The law in this area has been fairly settled for a very long time. It is unlawful for a contractual agreement to provide that a party agrees not to prosecute (or enable to prosecute) a criminal offence. It was known as “compounding” the offence and was treated as aggravated if it resulted from a non-disclosure agreement. Although the specific offence of “compounding” has now been repealed, it has been replaced as falling within the definition of  the common law offence of perverting the course of justice. It makes perfect sense on public policy grounds, but is often overlooked.

Most settlement agreements are nothing to do with criminal sexual harassment. They work both ways and are entered into consensually. Notably, in order to be enforceable, pursuant to the relevant provisions of the Employment Act 1996, they must:

  • be in writing
  • relate to a particular complaint or proceedings
  • the employee must have received advice from a relevant independent adviser, such as a lawyer or a certified and authorised member of a trade union
  • the independent adviser must have a current contract of insurance or professional indemnity covering the risk of a claim by the employee in respect of loss arising from the advice
  • the agreement must identify the adviser; and
  • the agreement must state that the applicable statutory conditions regulating the settlement agreement have been met.

If an approved adviser uses such an agreement to suppress or conceal illegal (criminal) activity then they may be a party to that criminal activity. I wonder how many of them think about that when advising their clients?

The truth is that most employees dealing with a prospective termination of employment would prefer to avoid litigation and, as long as the circumstances do not equate to conduct such as that which has been alleged in the Weinstein case, that is entirely understandable. They are likely to be concerned about the practical consequences such as reactions to past complaints and what might be said if a reference is sought. The world is not perfect and sometimes a clean break, a fresh start and a decent financial settlement is the most sensible option.

So what of the disclosure by Lord Peter Hain (with the benefit of Parliamentary privilege) that Sir Philip Green was the business tycoon who had spent hundreds of thousands of pounds in securing an interim injunction to prevent him being named as a party to proceedings which alleged bullying and sexual harassment. While freedom of speech has special protection in the form of Parliamentary privilege, its use must be both measured and sparing. Unfortunately, in this instance, Lord Hain has interfered in due legal process in a way which was clearly inappropriate, bearing in mind that what had been granted was an interim injunction pending an expedited trial of the issues scheduled for early next year.

Subsequently, the Government has announced that it is going to “toughen the regulation of gagging clauses” in order to crack down on employers who use NDAs “unethically”. At the same time the Women and Equalities Select Committee has opened an inquiry concerning the wider use of NDAs in cases which may involve harassment or discrimination, such as pregnancy or maternity discrimination or racist abuse. I suspect that both will reach the same conclusion, which is that the current law has sufficient power to provide appropriate protection, bearing in mind that any agreement which conceals illegality is of no effect and anyone who is a facilitator of such an agreement renders him or herself liable to criminal prosecution. Perhaps what is needed is to make these aspects of the law much more visible and to encourage their use where appropriate.