NDAs are used by businesses, celebrities, and now even presidents – NDAs are dominating the current news cycle. With increasing numbers of leading legal and journalistic professionals turning their eye on those that hold them and the bodies that seek to enforce them, businesses are now finding themselves on increasingly uncertain ground.
So, what is an NDA and what is it about them that is attracting so much negative attention?
What is an NDA?
Simply put, a non-disclosure agreement (NDA) is a legal contract that prohibits the signatory – be they a company, individual or other third party – from disclosing information that the document’s creator prefers to remain private. The document facilitates a confidential agreement between the relevant parties and conventionally covers sharing business information such as trade secrets, operating practices, or privileged knowledge. A conventional NDA agreement will see the signatory incentivised to sign as part of their initial contract, a pay-out, or a settlement deal; with a breach of contract opening them up to legal action.
Recent years have seen them re-deployed by businesses and private citizens seeking to keep controversial information out of the public eye – earning them the semi-pejorative term ‘gagging orders’ throughout the UK. The discussion about the legality of these agreements is ongoing, with the government recently rolling out “measures to protect workers from misuse of non-disclosure agreements” in order to actively address the issue.
Why are they problematic?
The profile of the #MeToo movement drew attention to the orders through the behaviour of Harvey Weinstein who sought to use NDAs to prevent his alleged victims from testifying against him.
The British Government has even faced backlash over their decision to deploy NDAs on pharmaceutical companies in late 2018 to prevent them from releasing information to the general public.
This has been further compounded through recent testimony given by Prof. Gary Moorhead of UCL to the Women and Equalities Committee that solicitors were ‘out of kilter’ when it came to their legal obligations and that orders were ‘unenforceable’ due to the disparity in resources available to the parties involved.
These ethical issues also abound in UCL’s recent NDA ethical research document, highlighting that employees are potentially vulnerable but “there are also other relationships, for example between consumers and sellers, tenants and their landlord, and pensioners and care homes.” And with IT, fintech and employment sectors depending on preserving their techniques and methodologies, there has never been a more pertinent time for companies to look at their NDA practice and determine if it is truly fit for purpose.
This has led to renewed scrutiny being levelled at the documents and the legal teams that draft them. Common criticism focuses on the fact that many NDAs are now being constructed without the lawyer paying full attention to the legal and ethical requirements they are required to professionally uphold.
These three obligations include:
- Considering if the information that would be disclosed by the NDA is in the public interest.
- Being wary of constructing a document that prevents disclosure of key information to the proper and relevant authorities.
- Drafting a document that actively prevents the rule of law or impedes the administration of justice.
This is often encountered in NDAs deployed in cases involving harassment, abuse, employment issues, and those that prevent the signator from commenting on future incidents as well as those that have occurred in the past.
How can we help?
Our team at Alston Asquith specialise in helping companies and a range of industry leaders throughout the world. Our comprehensive range of experience across a selection of industry and service sectors includes commercial law, tax law, technology law, data protection, intellectual property and employment law – perfectly placing us to unravel the issues around non-disclosure agreements and legal ethics.
If you want to find out more about how we can bring our experience to bear, please get in touch with our team directly (info@alstonasquith.com) and let us know how we can be of service.
