The dark side of NDAs
The Harvey Weinstein scandal sparked #MeToo and #TimesUp, simultaneously putting previously obscure non-disclosure agreements centre stage. Global Insight examines gagging orders and the role of lawyers and regulators in perpetuating a culture of sexual harassment.
It’s almost 18 months since allegations of sexual misconduct by one of the film industry’s most successful producers first rocked Hollywood. The victims continued to come forward. The reports kept pouring in. It soon became clear this wasn’t an isolated case. All the signs were pointing to abuse of power and a culture of impunity for over two decades, raising uncomfortable questions about the role of lawyers and the legal process in covering up such systemic abuse for so long.
The allegations against film producer Harvey Weinstein in October 2017 sparked the global #MeToo and #TimesUp movements against sexual harassment and assault. Suddenly, non-disclosure agreements (NDAs), which have long been a routine fixture in commercial contracts, were being criticised for covering up sexual crimes in exchange for hush money. A year later, in October 2018, the United Kingdom witnessed its own scandal when Topshop owner Philip Green was exposed as the prominent businessman who had obtained an injunction to stop a British newspaper from publishing details of sexual harassment claims made against him. In this case, the complainants had also signed NDAs to settle the allegations.
Rightly, these and other high-profile cases have refocused attention on legislation, the legal system and the ethical role of lawyers in enabling NDAs to keep unseemly behaviour under wraps. Zelda Perkins, Weinstein’s former assistant, is one of several former Miramax employees who decided to break their silence in 2017. For almost two decades an NDA had prohibited her from speaking out about allegations that Weinstein had attempted to rape one of her colleagues in 1998. But after other women came forward in October of that year, Perkins decided it was high time to expose the culture and system that enabled such behaviour to continue unchecked. ‘I felt that a very important light was shed on the systemic environmental problem around Harvey Weinstein, but also I think around a lot of powerful men and women and corporations where equality in front of the law doesn’t really exist,’ she says, speaking to Global Insight in October 2018, one year on from the initial Weinstein revelations.
Although it was the environment that facilitated such behaviour, Perkins suggests it was the legal system that ultimately failed her. ‘The reason that Harvey Weinstein behaved the way he behaved was because the system enabled that and part of that enablement came from the legal system sadly,’ she says. ‘Actually, for me, my real abuse and my real loss of confidence, loss of voice and loss of belief happened once I got into the hands of the system that I thought would help me.’
Rebecca Hilsenrath is Chief Executive of the Equality and Human Rights Commission (EHRC), which published a report in March 2018 looking at how employers deal with sexual harassment in their workplaces. Hilsenrath, who trained and practised at Linklaters, believes there are strong grounds for delegalising the whole process. ‘I think that expecting a woman who has been on the receiving end of a sexual harassment incident but who is not used to the legal world to go through a legal process, to be asked questions, to go to meetings that we may be used to as lawyers, must be very intimidating,’ says Hilsenrath. That'’'s why the whole thrust of our recommendations is to delegalise it and stop it happening so that you don't put this sort of power in the hands of lawyers.
Today, Perkins speaks candidly about her experience of negotiating and signing the NDA, which included lengthy discussions between her legal team from Simons Muirhead & Burton and Miramax’s lawyers, Allen & Overy. She received £125,000 in exchange for signing the NDA, but was banned from talking to a doctor, therapist or psychoanalyst about her experience. She wasn’t even allowed to keep a copy of the agreement or speak to the UK tax authority if questioned about the payment.
The role of the lawyers and the legal process surrounding Perkins’ case was a strong focus of the 2018 inquiry by the UK House of Commons Women and Equalities Committee into sexual harassment in workplaces. In April 2018, Paul Philip, Chief Executive of the Solicitors Regulation Authority (SRA), which regulates solicitors in England and Wales, told the Committee it had opened an investigation into the matter. An SRA spokesperson confirmed to Global Insight in January 2019 that the investigation is ongoing. Commenting on its role in the events of 1998, a spokesperson for Allen & Overy told Global Insight: ‘We remain satisfied that we acted in accordance with all of our applicable professional obligations.’ Simons Muirhead & Burton declined to comment when approached by Global Insight.
Mark Stephens CBE, Perkins’ current lawyer and a partner at Howard Kennedy, says NDAs were used against Zelda and her colleague ‘effectively to silence them from exposing Weinstein’s appalling behaviour’. With the exception of ‘giving away state or corporate secrets,’ Stephens says, ‘if there are allegations of inappropriate behaviour – whether that’s sexual behaviour, discrimination or bullying – there ought to be no NDA permissible.
Speaking to Global Insight in 2019, Perkins says: ‘In my eyes, this is about learning how to improve the regulations as well as the practice of the law so that there is less room for the abuse of the power and finance dynamic and clients are on a level playing ground in a legal arena.’
Perkins says her case has shone a light on the dark side of NDAs. ‘What was horrifying to me is that nobody did anything illegal,’ she says. ‘Everybody was working within legal parameters. And yet there was no recourse for me. That to me is the really horrifying part.’ As a non-lawyer, she says she feels obligated to speak out about NDAs to ensure others aren’t subjected to the arduous legal process she was forced to endure. ‘I think as laypeople, you know, we all have a duty,’ she says. ‘If we find there’s an issue we have a duty to highlight this so that the law can be made more impeccable. This isn’t about my individual agreement. It’s about the weaponising of NDAs, and maybe they shouldn’t ever be available for use in these sorts of circumstances.’
Confidentiality vs rights
Public outcry over the Weinstein and other scandals involving NDAs has indeed prompted questions as to whether such agreements should be banned altogether. In July 2018, the Women and Equalities Committee published a report calling on the UK government to clean up the use of NDAs. It argued there should be better regulation to ensure such agreements weren’t being used unethically to conceal sexual misconduct.
Clare Murray, Managing Partner at employment and partnership specialists CM Murray, believes an outright ban would do a disservice to victims of sexual harassment. ‘Many representatives feel that if NDAs were banned altogether, employers would be less willing, or at least much slower, to seek to resolve sexual harassment allegations,’ she says. In turn, Murray says this would risk ‘exposing the victims to greater stress, reputational risk, threats of adverse costs being sought against them, and ultimately potentially forcing them to go through an employment tribunal hearing with the uncertainties and trauma that often brings.’
A blanket ban could in fact cause more harm than good, says James Townsend, partner and head of the London Employment Law team at Michelmores. ‘When used ethically, NDAs are an essential protection for both parties and are a useful tool in settling disputes between parties,’ he says. ‘Over-regulating or limiting the enforceability of NDAs in settlement agreements could ultimately be to the disadvantage of claimants, as opposed to wealthy businessmen or employers, as there will be less incentive for such respondents to settle cases.’
There are occasions, of course, when claimants may even want to maintain their anonymity, particularly in claims involving sexual harassment allegations. ‘There are a lot of reasons why claimants might not want employers to know their identity, says Adele Edwin-Lamerton, a solicitor at Pattinson Brewer. ‘NDAs have an awful undertone to them because certain people have misused them, but don’t take a sledgehammer to crack a nut. Confidentiality can work, but the drafting should be clearer and claimants should know that they can’t sign away their rights by blowing the whistle.
Certainly more needs to be done to ensure individuals know their rights, regardless of whatever NDA they may enter into, says Elise Groulx Diggs, an international human rights lawyer and Vice-Chair of the IBA’s Business Human Rights Committee. ‘Any NDA cannot be framed legally to obstruct justice,’ she says. ‘For example, the NDA cannot be framed to prevent a woman from filing a criminal complaint with the police or to discourage a woman from seeking professional advice, whether it’s legal or psychological, or for that matter to discourage a woman from pursuing other legal action.
NDAs don’t make reporting the crime – either to the police or to the relevant regulator – off limits, agrees Haafiz Suleman, a senior associate at Clifford Chance. ‘That’s the main issue when you’re cutting through the legal jargon – to make sure that people are aware that they have that right,’ he says. ‘The Women and Equalities Committee made this point and people need to be aware of this.’
Baroness Helena Kennedy QC, Director of the IBA’s Human Rights Institute, told the Committee in January 2019 that improved drafting of such agreements could go a long way towards boosting awareness of victims’ rights. ‘I do think there ought to be at the top, in bold letters – and it can be boilerplate – that nothing in this agreement prevents the signatory to it from taking up their rights to go to the proper regulatory authority,’ she said during an evidence session examining the wider use of NDAs in cases involving alleged harassment or other discrimination.
Since February 2017, all first-instance judgments in Employment Tribunal cases in England, Wales and Scotland are held on an online database. This means claimants’ details are available for all to see, regardless of the outcome of a claim. Some believe this is discouraging victims from coming forward. Townsend says one solution might be to provide claimants with greater protections surrounding their anonymity. ‘If Parliament truly wants to level the playing field, it would be better looking to grant anonymity to claimants who complain of sexual harassment or racism in the workplace before an Employment Tribunal, unless they expressly wish to waive such right, rather than openly publishing judgments on the internet,’ he says.
Attorney Benjamin Brafman and Harvey Weinstein leave court after an unsuccessful hearing of the Harvey Weinstein case at New York Supreme Court, New York, 20 December 2018
Laying down the law
The Weinstein, Green and other scandals are putting increasing pressure on legislators to clamp down on the use of NDAs. In the United States, six states have already passed laws to impose limits on private companies using NDAs in sexual harassment cases. At least ten other states are considering similar legislation.
The UK is also beginning to move on this issue. In October 2018, following recommendations by the Women and Equalities Committee, the government outlined plans to ban the use of NDAs to conceal a criminal act. More details were published in December, revealing that the government intends to launch a national database for reporting sexual harassment incidents, improve regulation around NDAs and work with the EHRC to develop a new statutory code of practice to help employers understand and fulfil their legal responsibilities in this area.
Hilsenrath says this is a ‘critical first step’, but the government’s plans stopped short of placing full liability on employers. ‘We are pleased that the government recognises the need to put the onus on employers to stop sexual harassment from happening and to ensure they respond robustly when it does,’ she says. ‘Our new statutory code of practice will set out clear advice to help employers do this. However, to achieve real change, there also needs to be a mandatory enforceable duty on employers to protect their staff from harassment and victimisation.’
Beth Hale, partner and General Counsel at CM Murray, commends the government’s plans to introduce protection against third-party harassment and extend the time limits for employment claims. But she agrees with Hilsenrath that more should be done to guarantee that employers protect their employees from sexual harassment. ‘It is disappointing that the government has not taken the opportunity to place additional responsibilities on employers to prevent sexual harassment,’ she says. ‘It’s vital that employers understand their obligations and appreciate that they will face real and meaningful consequences if they don’t comply.’
Although laws will go some way to help protect employees, it’s widely accepted that even a partial ban on NDAs in specific circumstances is only part of the solution. Cyrus Vance Jr is District Attorney for Manhattan and the prosecutor who decided not to file charges against Weinstein in 2015, citing a lack of evidence to prove criminal intent. However, in May 2018, DA Vance brought charges of rape and criminal sexual acts against Weinstein in cases involving two women, making him the first prosecutor to do so.
He tells Global Insight there’s still a huge learning curve for prosecutors and governments when it comes to tackling the culture that allows workplace sexual misconduct to persist. ‘There are lots of laws around sex crimes that can probably be improved, but I think it’s more about culture,’ he says. ‘I think it’s about educating prosecutors like myself, who were not fully aware of the full scope of workplace sexual violence until it became apparent. That’s part of the education of anybody who’s in government. They have to be open to, and be prepared to address, things that they weren’t fully cognisant of before.’
Kate Bosworth, Sir Philip Green and Chloe Green at the Topshop Topman LA Grand Opening at The Grove, 14 February 2013, Los Angeles, California
While most commentators agree the Weinstein case is extreme, it does point to a broader cultural problem whereby those at the top abuse their power to ensure their misdemeanours are, at best, shrugged off. And, at worst, paid off. ‘To me the failure is really about the wider issue of due process,’ says Groulx Diggs, who is an associate tenant at Doughty Street Chambers. ‘There have been many institutional failures and disincentives, including threats that put pressure on women and other victims not to complain, to remain silent about cases of abuse and harassment,’ she says. ‘This remains a really big cultural issue that has been going on for so long and NDAs were just one of a number of tools that were “slapped on top” of workplace cultures to enforce silence. It’s about the domination of one group by another, just in this case it’s men dominating women in the workplace or men dominating people lower down on the totem pole.’
Hilsenrath says governments and regulators have an opportunity now to address the power imbalance that is present in so many workplaces. ‘The power all sits with the employer and, often, quite frankly, with the more senior colleague who is responsible for the harassment, and it’s very hard indeed for the employee,’ she says. ‘Yes, we’re looking to increase legal protections, but what we want is to stop it happening and to have a culture where it’s going to be safe for women to work. This is essential.’
Reports of historic sexual abuse that has been overlooked and even covered up by institutions has become all too common. Often the most vulnerable parts of society are the most affected. This was abundantly clear to Clifford Chance’s Suleman in 2018 when he acted for John Mann MP in his role as a core participant in the Independent Inquiry into Child Sexual Abuse (IICSA) in Nottinghamshire Councils. Although the inquiry didn’t reveal any agreements with survivors that contained confidential wording, it raised the wider issue of abuse of power and that institutions weren’t recognising systemic failures. ‘There were a large number of child abuse victims, many of whom were reporting abuse to authorities – or at least reporting suspicious behaviour – at the time and their cases were not being dealt with,’ says Suleman. ‘There was a fair amount of contemporaneous documentation pointing to the fact that things weren’t right, but it seemed this hadn’t been followed up on.’
This was, he says, largely because the councils tended to deal with cases in isolation. ‘In the Inquiry, one witness recounted feeling like he was being given a £10 note and told to go home and shut up,’ he says. ‘So it was very much the theme there too that institutions were reactive, dealing with individual problems rather than looking at the broader picture.’ He says the IICSA really brought home how easy it is for institutions to simply forgive and forget without tackling the root of the problem head on. ‘It’s the point that if you don’t allow institutions to look back – for example, by allowing them to enter into confidentiality clauses and NDAs in relation to serious crime – they treat each reported crime as a standalone case and they don’t look at the broader picture.’
Time for reflection
Many regard lawyers as the gatekeepers of NDAs, leaving them open to much of the criticism that has been directed at these agreements for their part in maintaining a culture of silence around workplace sexual harassment. Some say this is unfair, but, undoubtedly, it’s given the profession the opportunity to reflect on its involvement in these types of agreements. Better still, it’s forced many to put their own houses in order.
Iain Miller, a partner at Kingsley Napley and member of the IBA’s Regulation of Lawyers’ Compliance Committee Advisory Board, says the structure of many law firms, much like other institutions, can create an ‘imbalance of power’. This in turn makes it difficult to spot patterns in isolated reports of issues, like sexual misconduct, that should point to a wider problem. ‘In most systems, the emphasis is on the individual, but within these types of issues it’s a lot better if we look at what’s been done as a symptom of a wider malaise,’ he says.
Kennedy says the debate over NDAs has highlighted a much broader pattern where women, including female lawyers, continue to be silenced over the ways in which they are abused. This has focused attention on where the regulatory framework governing the legal profession is falling short. ‘There isn’t a requirement [for lawyers] to report something that’s beginning to look like a pattern in a particular person in a workplace,’ says Kennedy. This is even in the event that the individual concerned is repeatedly ‘discriminating on payment; on the way that they treat pregnant women or on the way they deal with sexual harassment allegations against a particular individual who is an asset to a company and therefore it’s much better to protect him than some young employee‘.
Kennedy acknowledges that the legal profession in England and Wales is widely regarded as the ‘gold standard’, but believes there’s still more its legal regulators could do to ensure lawyers act responsibly. ‘Lawyers think their duty is to their client,’ she says, ‘but this is an area where I think the legal bodies – from the Bar Council through to the solicitors’ profession – should be clarifying for lawyers what their responsibilities are to their clients, where that responsibility ends and where their duty to the court and to the public interest begins.’
Law firms on the spot as claims rise
As the SRA continues to investigate sexual harassment claims across England and Wales, there are ongoing questions about what law firms are doing to combat these issues.
In 2018, Baker McKenzie carried out an independent review into allegations of sexual harassment at the firm after it emerged that one of its partners had sexually assaulted a female associate following an event. The review, conducted in conjunction with Simmons & Simmons, concluded there were a ‘number of shortcomings in the way the incident was handled at that time’. It noted that Baker McKenzie had subsequently set up a reporting hotline and brought in ‘enhanced mandatory training on conduct and ethics’, among other improvements.
A spokesperson for the firm told Global Insight it was cooperating with the SRA to investigate both the incident and the firm’s response. ‘None of this has been easy but it’s been a necessary period of reflection and self-assessment,’ the firm said in a statement. ‘We are determined to learn, to ensure that these new programmes are implemented consistently across the firm, and to use this moment to improve.’
Reed Smith has also come under fire for its mishandling of a sexual harassment claim made by two trainees after it revealed the details of one trainee to the SRA, despite their express wish to remain anonymous. The firm was bound by its reporting obligations to disclose this information to the SRA, but the trainee had been misinformed by a colleague that her personal details would not be shared with the regulator.
Tamara Box, Reed Smith’s Managing Partner, Europe & Middle East, says: ‘In dealing with this sensitive matter we owe duties both to our people, who are always our paramount concern, as well as to our regulator. The SRA is empowered to police these issues and has statutory powers to require disclosure. This can lead to complex situations, which in this case we sought to manage in the best way possible while of course fully complying with our regulatory obligations.’
Iain Miller, a partner at Kingsley Napley, says it’s encouraging that these and other cases are coming to light. ‘There’s been a huge shift in terms of greater awareness of these issues,’ he says. ‘The level of tolerance has been reduced. It’s about encouraging an environment where these acts don’t and can’t take place and an environment where people feel they can speak out.’
The SRA issued a notice in March 2018 warning lawyers about the risks posed by NDAs. This prompted a steep rise in reported incidents of sexual harassment or misconduct within law firms. The SRA received 43 reports of sexual harassment or misconduct by colleagues from 1 November 2017 to 31 October 2018 – more than the previous four years put together. Eight of these involve NDAs being used to conceal sexual harassment.
In a statement, the SRA’s Paul Philip said the marked increase showed ‘firms are taking these reports seriously’. At the end of November, the SRA published another statement highlighting the responsibilities and risks facing solicitors involved in drafting NDAs in relation to harassment allegations. Edwin-Lamerton is saddened that the SRA has had to spell out these obligations to lawyers, but says law firms are starting to learn from their mistakes. ‘I feel sorry that this is needed as it shows a need to lay it down this specifically,’ she says. ‘What has changed is firms are getting investigated, they’re sacking partners and they’re making junior lawyers feel supported and ensuring that they don’t feel ostracised.’ (See box: Law firms on the spot as claims rise)
The UK isn’t the only country where legal regulators are shaking things up. In early 2018, reports emerged of alleged incidents of sexual harassment in 2015/2016 at New Zealand law firm Russell McVeagh. This prompted an inquiry, which exposed a ‘work hard, play hard’ culture of excessive drinking and ‘inadequate’ efforts by the firm’s management to resolve the problem. Under pressure to respond, in December 2018 the New Zealand Law Society published a report citing new rules for lawyers in relation to reporting and taking action against sexual harassment, bullying, discrimination and other unacceptable behaviour. The report also looks specifically at NDAs in the context of lawyers’ regulation and puts forward recommendations regarding the auditing and monitoring of NDAs.
Miller is a regulation and public law specialist, having previously advised the SRA for more than two decades. He says regulators have been right to focus on solicitors’ role in covering up sexual harassment and negotiating confidentiality agreements, both on behalf of their clients and within their own firms. ‘The big picture point is that, frankly, two or three years ago people didn’t have to think about these issues, largely because, while there might have been HR consequences, they wouldn’t have triggered all these regulatory issues,’ he says. ‘The biggest driver has been Zelda and others in raising awareness of these issues.’
Although, for some, action by the SRA and other regulators isn’t happening fast enough, Miller’s confident that 2019 will be a year of reckoning for the legal profession. ‘At the moment the impression from the outside might be that nothing is happening, but I think that’s just because the various processes are being gone through,’ he says. ‘This is a new area for the SRA and others. I think in 2019 we’re going to see a number of cases where the outcomes will be made public.’
Ruth Green is Multimedia Journalist at the IBA and can be contacted at email@example.com