NDA advice “must be about more than just the law”

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Moorhead: Risk of cover-up

Any solicitor who thinks it is only the law that restricts advice on non-disclosure agreements (NDAs), ignoring the wider public interest, is “heading for trouble”, experts have warned.

They also reminded solicitors that their client, when drafting an NDA, is the organisation and not the chief executive.

“There is a risk that individual bosses use NDAs to settle disputes that would embarrass them if public.

“That risk of cover-up means that even where an NDA is used appropriately, solicitors should remind clients that the obligation to report serious breaches to their regulator remains.”

The warning came in an article in The Times yesterday written by Crispin Passmore, former executive director at the Solicitors Regulation Authority (SRA) who is now a consultant, and Richard Moorhead, professor of law and professional ethics at UCL.

The pair, especially Professor Moorhead, have been at the forefront of critiquing the professional and regulatory response to NDA misuse, and were looking ahead to an SRA rewrite of the warning notice the regulator issued in March 2018.

They said that “much has changed” since then, such as the report on the use of NDAs in discrimination cases by the House of Commons women and equalities committee – to which Professor Moorhead is a special adviser.

“Any updated warning notice must begin with a recognition that the misuse of NDAs extends beyond employment disputes and tackle more of the abuses we have seen,” they wrote.

Problems also went beyond solicitors undermining the rule of law by inhibiting external investigations: “NDAs often leave the counterparty confused, so they must not be based on clever drafting.

“If the other party is likely to be left thinking they might not be able to report something or is likely to be inhibited in what they can report then the NDA is unacceptable.

“And it is not acceptable to intimidate weaker parties by using clawback clauses that permit the automatic recovery of large sums of money for even minor alleged breaches, especially if that inhibits reporting.”

The pair said obfuscation may be “deliberate practice” when drafting whistleblowing rights clauses. But solicitors could not rely on the other side being represented – “this should not be a battle between lawyers, but rather solicitors must act consistently with the administration of justice”.

“We hear lawyers say that they cannot be penalised for doing lawful things, which could translate to the view that they cannot be criticised for inappropriately exploiting uncertainty to the advantage of overly powerful clients.

“But NDAs must not be deployed in ways that stifle the public interest in hearing about and tackling misconduct. Any solicitor who thinks it is only the law that restricts advice on NDAs is heading for trouble, and the SRA warning notice needs to make this clear.”