Policy Explainer Non-Disclosure Agreements
Earlier this month (April) the government unveiled plans to ban the use of non-disclosure agreements (NDAs) to prevent workers from reporting a crime, such as sexual harassment at work.
Gagged
The Ministry of Justice announced it will introduce legislation to clarify that NDAs cannot be legally enforced if they prevent victims from reporting criminal conduct. At present, it has not announced a timeline for the ban.
However, the new law means that victims will be able to speak to the police, as well as legal and medical professionals, without worrying about the repercussions of breaching any confidentiality clauses imposed by their employer.
Other parts of confidentiality agreements covering commercially sensitive information, financial agreements and any other obligations unrelated to criminal conduct will retain their legal effects.
Alex Chalk, the justice secretary, said: “We are bringing an end to the murky world of non-disclosure agreements which are too often used to sweep criminality under the carpet and prevent victims from accessing the advice and support they need.”
The legal change will bring the UK into line with the US, which passed the Speak Out Act in 2022. This prohibits NDAs in regard to sexual harassment and sexual assault.
Back To Basics
NDAs were originally used to protect trade secrets, not to silence victims of sexual harassment and discrimination. They appear to have been used as early as the 1940s in maritime law, but it wasn’t until the 1980s that they became commonplace in the tech industry to protect trade secrets.
These legal agreements were, at that point, designed to make sure that an employee moving from one company to another didn’t share confidential material with their new employer.
Since then, NDAs have gradually crept into a wider variety of contracts and become normalised in settling disputes about sexual misconduct and other forms of discrimination.
Sexism In The City
A government clampdown on ‘gagging orders’ to silence victims follows hot on the heels of last month’s findings by a parliamentary inquiry, which highlighted the “shocking” prevalence of sexual harassment and bullying against women in the UK’s financial sector.
The Treasury Committee’s eight month ‘Sexism in the City’ inquiry raised concerns about a lack of progress in promoting and protecting women in one of the UK’s most lucrative industries.
The cross-party committee of MPs were also critical of “widespread misuse” of NDAs, saying they had the effect of “silencing the victim of harassment and forcing them out of an organisation, while protecting perpetrators and leaving them free to continue their careers and go on and abuse others”.
Harriett Baldwin, chair of the Treasury committee, said: “This well-paid sector will only be able to maintain its competitive advantage if it is able to draw on the widest possible pool of talent. That’s why it is so frustrating that efforts to tackle sexism in the City are moving at a snail’s pace.”
MPs also noted the finance industry still has the largest gender pay gap of any UK sector.
About the author
Dr. Roger Barker is Director of Policy and Governance at the Institute of Directors, and a member of the Management Board. Dr. Barker is the author of numerous books and articles on corporate governance and board effectiveness, including the recent volume: ‘The Law and Governance of Decentralised Business Models: Between Hierarchies and Markets’ (Routledge, 2020). He is a former member of the European Economic and Social Committee and the founder of a successful corporate governance advisory company. A former investment banker, Dr. Barker spent almost 15 years in a variety of equity research and senior management roles at UBS and Bank Vontobel, both in the UK and Switzerland. He has a doctorate from Oxford University and taught politics at Merton College, Oxford (2005-2008).
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