NDAs in the legal profession after Weinstein: SRA warns solicitors against misuse

May 22, 2018

Evidence was given recently at the Women and Equalities Select Committee about the way in which allegations of sexual harassment against Harvey Weinstein were suppressed by means of high-pressure negotiation and stringent non-disclosure agreements (“NDAs”).  The session highlighted the improper use of NDAs in certain circumstances to conceal discrimination, harassment or even criminal behaviour in the workplace.  Pre-empting Parliament and the media’s recent focus on the issue, the SRA last month released a warning notice to solicitors setting out its concerns about inappropriate use of NDAs within law firms.  In light of the warning, how can lawyers and the clients they advise make sure they do not fall foul of the regulator when investigating sexual harassment allegations and dealing with the aftermath?   

The SRA’s concerns

The SRA’s warning notice showed concern around the relatively few complaints made to it about inappropriate sexual behaviour in the firms it regulates: in the two years to October 2017 the SRA received 21 notifications relating to sexual misconduct allegations.  From this relatively low figure the SRA inferred that there was a practice of using NDAs to conceal serious and sometimes criminal behaviour.  The warning notice alerted firms to the fact that the use of NDAs to deter staff from reporting sexual harassment or other reportable conduct would be a breach of the Code of Conduct.

The warning notice is a timely reminder of the added regulatory dimension when investigating misconduct in the legal profession.   

Investigating allegations

Sexual misconduct in the workplace will not often be as extreme as the allegations made against Harvey Weinstein.  Sexual harassment may be defined as any conduct of a sexual nature which makes one or more members of staff feel uncomfortable which may, for example, derive from inappropriate comments or a workplace dress code.  A complaint may relate to a one-off incident or form part of a wider culture of sexual harassment: if a firm suspects the latter, it is important to ensure the resulting investigation is tailored accordingly.

Law firms should be mindful of the Code of Conduct, which states that attempting to prevent the SRA from investigating any allegation of misconduct by the entering into an agreement will not in most circumstances be compliant with the Outcomes.

Equally, lawyers must not use inappropriate threats of litigation (such as defamation where a claim is known to be unsustainable) as a means of silencing a complainant. 

Allegations must therefore be investigated in full and not simply pre-empted by a “hush-up” financial settlement with far-reaching confidentiality obligations.    

Privilege

One of the key risks involved in investigating allegations of sexual harassment is the potential reputational damage from an inadequate investigation or response.  An employee who makes allegations against other members of staff might seek to bring proceedings against the firm.    Workplace documents relevant to the investigation or the allegations made will have to be disclosed to the court or tribunal unless they benefit from legal privilege. 

A document (such as meeting notes) will be privileged if it is produced for the primary purpose of giving legal advice or in contemplation of legal proceedings.  At the early stages of an investigation, a recording or transcript of an interview with a witness or the alleged wrongdoer may not be privileged. Where sensitive matters may be imparted at the interviews, ensuring that notes are taken only by lawyers (whether from within the firm or by external lawyers) for the purpose of advising on the firm’s liability will help maintain privilege over those notes.   

If the investigation shows that a firm is liable for a worker’s harassment of a colleague, any resulting settlement negotiations will be covered by “without prejudice” privilege, meaning that those negotiations cannot be referred to in court if the settlement talks break down.  However, there are limits to this principle.  Most relevant in this context is that communications which are “unambiguously improper” do not benefit from protection: inappropriate threats of litigation against the complainant, for example, could not be concealed from a court or tribunal simply because they were communicated in settlement negotiations.  In any case, to make such threats would place a law firm in breach of the Code of Conduct, which prohibits solicitors and certain other lawyers from taking unfair advantage of third parties in either a professional or personal capacity.

Settlement of claims

Confidentiality obligations in a settlement agreement can, in principle, be of benefit to both parties to a dispute.  Indeed, in the employment law context a confidentiality obligation on its own is a central part of a settlement deal following an acrimonious departure, and is rarely a controversial feature.    

However, the Select Committee evidence in relation to the Weinstein matter revealed a very different picture.  The obligations on the departing employees were particularly onerous and unreasonable, with the employees being prevented even from discussing their employment professional advisers unless those advisers signed confidentiality undertakings of their own.  The employees weren’t even allowed to keep their own copy of the NDA.  Whilst those obligations are unusual, the more important issue for the SRA is the use of NDAs by lawyers to prevent complainants from cooperating with criminal or regulatory investigations or from disclosing misconduct.        

Key points for HR in the legal profession

  • Whilst any legal settlement should ensure that the parties are required to maintain confidentiality and not disparage the other, it is important that the circumstances do not suggest a ‘hush up’, which was characteristic of the Weinstein allegations. 
  • Law firms must avoid using unfair tactics such as threats to enforce obligations which are known to be unenforceable.  This is especially the case where the member of staff who submits a complaint is unrepresented.  The SRA is clear that a firm’s regulatory duties are heightened in this scenario.
  • Specifically, the confidentiality obligations should not prevent a complainant from reporting criminal or regulatory offences, or from whistleblowing.
  • Law firms should not use the fact that a complaint has been settled as an excuse not to report proven allegations to the SRA where they constitute misconduct or regulatory breaches.    
  • If the investigation reveals allegations to be true, disciplinary action against the individual wrongdoer will always be necessary response but may not be sufficient: firms should always consider further preventative measures and particular lessons to be learned from the investigation.

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