NDAs and #MeToo in the eCommerce industry: what next?

Since the unstoppable rise of the #MeToo movement, sexual harassment has continued to be a major concern in all UK workplaces.

Of particular focus has been the use of non-disclosure agreements (NDAs) or confidentiality agreements to cover up sexual harassment. Confidentiality clauses are commonplace in settlement agreements so that both parties can move on from a dispute, but are also found in other contracts, such as employment agreements. By putting in place a NDA, the company gains the comfort that the employee is not going to share details of the dispute when they have been paid a (sometimes very substantial) settlement sum. The employees themselves often benefit from, and sometimes ask for, a confidentiality clause so that the details of their complaint can remain private.

However, some NDAs have been criticised for being too far reaching. The important question is how far is too far?

After the repeated sexual harassment allegations against Harvey Weinstein were exposed, the NDAs used to cover up and silence his accusers were uncovered. In one widely-reported instance, Mr Weinstein’s former assistant was prevented from talking to the police without telling his lawyers and was not even allowed to keep a copy of her NDA.

In the retail sector, the chairman of Arcadia Group, Sir Philip Green, has also had wide scale media attention after an injunction was lifted, revealing details of NDAs used to try to ensure that accusations of sexual harassment about him were not made public. In some cases, payments of more than £1 million had been made to his accusers.

So, what does this mean going forward? The practice of using strict NDAs which prevent any type of disclosure have been criticised for normalising bad behaviours. Companies are now paying considerable attention to changing their culture, and preventing cover ups or perceived condonation of harassing behaviours. From the perspective of the victim, #MeToo has empowered them to report allegations and stand up against these behaviours without fear of retaliation.

Various groups, including the Equality and Human Rights Commission (EHRC) and the Solicitors Regulation Authority (SRA) have published guidance and the government now plans to introduce new legislation to clamp down on the oppressive use of NDAs.

The government has certainly faced challenges in considering proposing new legislation. There have been calls to prohibit the use of NDAs entirely in sexual harassment cases. However, it is recognised that NDAs have a place in contractual agreements, particularly in settlement agreements, and that in some cases the employees themselves actually want confidentiality. The EHRC guidance says that companies should consider NDAs on a case-by-case basis, they should be limited to what is necessary and the individual should be told why the NDA is being used.

The warning notice issued by the SRA emphasises that the wording of NDAs should include ‘carve outs’ making it clear that the NDA does not prevent the individual from talking to their lawyer, reporting criminal offences, co-operating with criminal investigations or blowing the whistle on matters which they believe to be in the public interest, including making disclosures to regulators.

Proposed new legislation seeks to go further so that individuals have to get explicit legal advice on the effect of signing an NDA. The Government has also said that failure to meet the requirements set by the legislation could mean the entire NDA is void.

It is important to note that the guidance, SRA warning notice and proposed legislation apply to all NDAs and not just ones used in cases where sexual harassment has been alleged.

Businesses should be ensuring that all NDAs are compliant with the SRA warning notice and should be giving thorough consideration to the EHRC guidance. It is likely that any NDA will be negotiated upon, with individuals seeking disclosure to a wider group of individuals, such as family members, trade union representatives, medical practitioners and therapists. These terms may be ‘make or break’ for an individual and most companies are choosing to err on the side of caution and allow these types of disclosures. There may also be negotiation over the detail of what can and cannot be said to a prospective new employer.

No sector has been left untouched by the #MeToo movement and the eCommerce sector should certainly be reviewing its usage of NDAs. Particular attention should be given to specific exclusions for disclosures to regulators if an online business provides consumer credit, meaning it is likely to be FCA regulated.

With the high street retail sector having already been rocked by allegations of sexual harassment and subsequent cover-ups, online retailers need to make sure that history does not repeat itself by promoting a zero-tolerance culture towards sexual harassment, putting policies in place against harassment and allowing for the necessary ‘carve outs’ on the issue where NDAs are used. There is no set date for new legislation to come into effect and as the #MeToo movement continues to gain traction, further changes may need to be implemented. Watch this space.