NDAs: Gagging Victims

Apologies for not posting for awhile but here I am again. A number of useful legislative reforms to protect workers have been passed or in the process of being passed - usually originating in a private members bill - wage theft, modern slavery and the right to discuss you remuneration. In this blog I cover another area that needs to be addressed -the abuse of Non-Disclosure Agreements and some overseas initiatives dealing with this problem.

Over aggressive lawyering

I have recently been reading the book based on the prestigious 2024 Hamlyn Lectures given by Professor Richard Moorhead, The book Frail Professionalism: Lawyers’ Ethics After the Post Office Case is available for free download and should be compulsory reading for all lawyers or indeed anyone involved in litigation. Professor Moorhead describes in considerable detail the ethical and professional failures by both barristers and solicitors in the way they conducted the prosecution of sub-postmasters/mistresses for alleged theft. Most importantly he makes it clear that the practices he discusses were not aberrations but business as normal; the result of what he calls ‘aggressive lawyering’ and ‘legality illusion’. Both tactics involve pushing the law to or beyond what is ethically, and in some situations, legally justifiable.

Some particular example, such as SLAPPS (Strategic Litigation Against Public Participation) and threats of defamation actions are examples given. However, probably most relevant to employment law is the use of NDAs (Non-Disclosure Agreements) and it is those that I want to focus on. NDAs are a common feature of legal settlements and are probably regarded as normal legal practice by most lawyers. Indeed the notion of non-disclosure/confidentiality is inherent to the mediation process by virtue of s 148 of the ER Act.

NDAs

NDAs have perfectly legitimate uses but they are also capable of being abused to gag employees. Professor Moorhead makes the point that NDAs were a key weapon used by the Post Office solicitors to prevent comment on its defective payment system.

 He also points to NDAs being weaponised by lawyers acting for Harvey Weinstein, Mohammed Al Fayed, and Philip Green enabling them to cover up and perpetuate ongoing sexual abuse. He gives the example of an NDA relating to Weinstein and covering Zelda Perkins. The NDA, he says, “inhibited her ability to talk to the police –or, indeed, anyone – about the harassment and sexual assault she had experienced. She was even prevented from keeping a copy of the agreement or seeking advice on it without permission.”

The power of NDAs lies in ‘clawback’ clauses which require the party breaching the terms of the NDA to repay monies paid to them as part of any settlement. NDAs may also form the basis of an injunction to prevent disclosure. And any breach carries the threat of significant legal costs against the disclosing party.

Where NDAs become oppressive is when they attempt to prevent disclosures of criminal conduct, often sexual assault or harassment, or risks to safety and health and especially psychosocial harm such as bullying or unacceptable workplace stress.

NDAs are also likely to gag a party from discussing the harmful conduct with family, close friends, or professionals such as doctors or psychologists, a factor that have long-term detrimental effects for the victim.

Fighting Abusive NDAs

Ms Perkins decided to break her NDA and went on to be one of the founders of the Can’t Buy My Silence movement. The organisation’s web page provides a wealth of information on the problematic use of NDAs.

A second source of information is the Lets Talk About Confidentiality Report. This report which can be downloaded provides an extremely comprehensive discussion of the practical, personal and legal issues raised by NDAs in Australia. A comment from that Report gives a sense of the depth of the problem:

We have heard from clients who signed an NDA 15-25 years ago who talk about how they live in a constant fear they may break it. That they see the harasser have a career that flourished while they struggled to explain why they left working with such a well-known person or employer, and are unable to explain the gap on their resumé having been unable to work due to mental health issues caused by the sexual harassment.

Perhaps unsurprisingly, Professor Moorhead asks, “with NDAs as an example, questions have been raised about whether lawyers may have perverted the course of justice and breached their professional conduct rules when drafting draconian gagging clauses.” He is, rightly, also highly sceptical of the technical argument that the relevant party has “consented” to be bound. Real consent is of course highly problematic in many employment situations.

Legislative Reform

A number of jurisdictions have recognised the need to regulate the use of NDAs. Ireland enacted legislation in 2024 which restricts the use of NDAs in situations involving allegations of discrimination, victimisation, harassment and sexual harassment unless the NDA meets clear statutory criteria. Canada has some general restrictions and some provinces have legislation similar to Ireland.

Closer to New Zealand is the non-disclosure legislation that came into effect on 1 July this year in Victoria. This legislation is restricted to NDAs relating to workplace sexual harassment. For such a NDA to be valid it must meet clear criteria:

• The worker who made the complaint must requests the NDA. It has to be their express wish, not something offered to them.
• The worker must be given a mandatory information statement before signing.
• There is a 21-day review period to seek advice.
• Both parties must confirm in writing that the preconditions were met.

And importantly:

·         Employers are prohibited from pressuring or influencing a worker into an NDA (so the usual nudging is off the table).

·         A worker who signs an NDA can terminate it after 12 months by giving written notice.

Reform in New Zealand?

Given the potential for overreach and abuse similar reforms should be enacted in New Zealand but the protection should not be restricted to sexual harassment but should follow the wider Irish approach.

Such protections would give a worker significantly more leverage when negotiating NGAs which, of course, may go beyond the matters identified in the legislation.