Business Irish

Monday 17 June 2019

#heretoo: Irish firms must weigh up the pros and cons of using NDAs

The #MeToo scandals have prompted intense discussion around the use of non-disclosure agreements in the workplace after harassment investigations. Picture posed by models
The #MeToo scandals have prompted intense discussion around the use of non-disclosure agreements in the workplace after harassment investigations. Picture posed by models

Terence McCrann and Emma Libreri

The #MeToo scandals have prompted intense discussion around the use of non-disclosure agreements (NDAs) and whether they might be seen as allowing abusive behaviour to go unchecked.

Although many of the issues raised touch on rights protected by the Irish Constitution, such as both parties' rights to privacy, an employer's right to protect its reputation and an employee's right to freedom of expression, the issue has yet to be considered in the courts in Ireland.

The high-profile UK case of ABC v Telegraph Media Group Ltd has once again raised the issue, with the Court of Appeal granting a temporary interim injunction preventing the Daily Telegraph from publishing allegations of "discreditable conduct" by a prominent business executive towards five employees who had entered into settlement agreements containing NDAs.

The reignited debate resulted in the executive in question being subsequently named under parliamentary privilege, thus thwarting the injunction.

In light of the controversy, British Prime Minister Theresa May has committed to bringing forward measures for consideration and consultation to improve the regulation of NDAs, noting in the House of Commons that "it is clear that some employers are using them unethically".

Such considerations have already led to legislative changes in the US. California has introduced legislation which prohibits any provision in a settlement agreement that prevents the disclosure of factual information in relation to a complaint filed in a civil or administrative action relating to sexual assault or sexual harassment.

New York has prohibited the inclusion of NDAs in the settlement of sexual harassment claims, unless the inclusion of such a provision is the alleged victim's preference.

The fallout from the ABC case suggests similar legislation may also be on the horizon in the UK.

Indeed, this issue had already been the subject of a report on sexual harassment in the workplace, carried out by the Women and Equalities Committee of the House of Commons in Britain.

That report noted that NDAs were being used "unethically by some employers and also some members of the legal profession to silence victims of sexual harassment" and recommended the introduction of improved controls and regulations.

While there have been no relevant Irish cases, and it is yet to be seen whether the Irish legislature will decide to regulate on the issue, the ABC case provides some guidelines for Irish employers in relation to NDAs.

In that case, a persuasive factor for the Court of Appeal in granting the injunction and overturning the decision of the High Court, was that each of the employees had received independent legal advice, each had a right to disclose information to regulatory or statutory bodies and there was no evidence that the settlement agreements were reached through bullying, harassment or the placing of undue pressure on the employees in question.

The Court of Appeal also recognised the public benefit to enforcing contracts which have been freely entered into by the parties in order to settle their disputes.

It was of particular importance for the court that the High Court had not considered the important role settlement agreements and NDAs have in settling disputes and avoiding litigation and also the need for the courts to respect contracts that parties have freely agreed.

The Women and Equalities Committee report had also acknowledged the value of NDAs in certain circumstances, noting that "there may be times when the victim makes the judgment that signing an NDA is genuinely in their own best interests".

What the report was highly critical of, however, was the use of NDAs "to threaten, bully and silence victims" giving rise to the risk that individuals would refrain from reporting serious wrongdoing to the police or would feel compelled not to assist in law enforcement investigations or prosecutions or be unable to speak openly and in the public interest about serious wrongdoing.

Employers relying on NDAs should be very aware of the need for careful drafting and negotiation with employees in order to ensure those NDAs are in fact enforceable.

Employers should ensure that their employees or former employees obtain independent legal advice and that the circumstances in which the settlement agreement is signed do not give rise to any indication of bullying or duress.

The settlement agreement should also include appropriate exclusions allowing the employee to disclose information to the appropriate legal and regulatory authorities.

  • Terence McCrann and Emma Libreri, Employment, Pensions & Incentives Group, McCann FitzGerald

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