There has been a lot of media attention recently on non-disclosure agreements (NDA) in the employment law context. They are often referred to by the media as “gagging clauses” – often quite accurately. Employers are being criticised in some cases for attempting to apply them.
Do they still have their uses? Do they even work?
Sometimes NDAs are entered into before the possible events that might be their subject, and sometimes after.
Employers often incorporate a gagging clause or separate NDA as part of the employment contract of for example a nanny or butler, who would be privy to very personal and private details of their employer’s life. Most people would agree that this is reasonable.
On the other hand, NDAs were entered into by the women employed for the now notorious Presidents Club dinner in January 2018, largely, it might be suspected, to protect the reputations of sex pests.
NDAs are also often entered into after particular events to restrain publicity. There have been allegations, for example, that Harvey Weinstein regularly entered into such agreements after particular incidents. More usually, employment settlement agreements contain a confidentiality clause which is usually not seen as objectionable.
There are broadly two areas where NDAs will be ineffective in employment law:
The employer cannot use an NDA to stifle legitimate claims against itself. If these claims come to court (or an employment tribunal) that will be in public and hence details may get out.
In whistleblowing, or public interest disclosures, it is not legally possible to prevent a person from making the disclosure in accordance with the rules. Any agreement which purports to do so is invalid.
In many cases, yes.
In the commercial sphere, they are often essential to allow the sharing, with some legal comfort, of novel ideas or plans in order to get them off the ground. It is often to the benefit of both parties to have an NDA in such circumstances.
In the employment field, pre-event and post-event NDAs still have their place. The major downside for an employer of an NDA is the risk of negative publicity simply for trying to use “gagging clauses” – this is particularly relevant for public bodies or PLCs.
Whenever an employer is thinking of imposing a gagging clause, it should consider carefully, and perhaps take legal advice on, what it is needed for, what it should cover, how enforceable it might be, and what the negative consequences might be.
If an employee is subject to an NDA which becomes a problem, or is asked to enter into one, he or she should consider taking legal advice before doing something – whether signing or breaking an NDA – which may have serious consequences.