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Farrer & Co | Sexual harassment - changing the face of gagging clauses

We have written a lot about sexual harassment in recent months; we've also written about gagging clauses (ie confidentiality clauses that prevent people from speaking out about allegations or making adverse comments about employers). But what happens when the two meet, say in a non-disclosure agreement (an NDA) or a settlement agreement?

If you had asked this question a year ago, or even just last summer, many would have said that there was no issue; that it was perfectly acceptable for a standard gagging clause to be used in the context of sexual harassment. Fast forward to today and the landscape is radically different. Organisations are suddenly finding themselves facing strong criticism and reputational damage for using NDAs and gagging clauses in cases of alleged sexual harassment – just take the BBC or the Weinstein Company. There is now a growing sense that such clauses have been used inappropriately to silence victims and, as a result, have allowed perpetrators like Weinstein to get away with their behaviour for years. In the context of safeguarding and abuse allegations, the use of NDAs has largely been curbed, partly sparked by the Savile scandal; it now looks like a similar revolution may be afoot in respect of sexual harassment allegations in the workplace.

Just last week, the Solicitors Regulation Authority issued a formal warning notice to law firms on the use of NDAs. Whilst not prohibiting their use, the gist of the SRA's message is as follows:

  1. NDAs should not be used in circumstances which may make individuals feel unable to notify the SRA, other regulators or law enforcement agencies of otherwise reportable behaviour.
  2. Employers should not treat an NDA as a reason not to notify the SRA of misconduct or serious breaches of regulatory requirements.
  3. NDAs should not be used as a means of improperly threatening litigation or other adverse consequences, or otherwise exerting inappropriate influence over people not to make disclosures which are protected by statute, or reportable to regulators or law enforcement agencies.

Although this guidance is directly aimed at law firms, it gives a strong indication of the prevailing wind right now and in our view is likely to represent (or at least will come to represent) best practice for most industries in respect of sexual harassment.

So certainly for law firms, but in our opinion for all employers in general, we would suggest taking the following steps when faced with the prospect of settling a sexual harassment allegation:

  • Ensure that this is a case which should be settled. One of the issues with the Weinstein saga (and others like it) is that settlement agreements and NDAs seem to have been used to brush issues under the carpet, avoid tackling an underlying problem and exercise inappropriate influence over victims' ability to talk. That is not to say that sexual harassment cases can't be settled – often a victim will expressly request it, and certainly settlement agreements can be used legitimately to protect both parties' interests and reputations. However, careful consideration should be given to each particular case. And certainly question the appropriateness of being seen to "pay off" a potential perpetrator of harassment.
  • If a settlement agreement is used, consider to what extent it is appropriate to include a gagging clause / use an NDA. In most cases, it will be in both parties' interests to have some sort of wording about confidentiality and not making derogatory comments, but take particular care that this does not preclude (or importantly is not perceived to preclude) either party making reports to regulators or law enforcement agencies. A lot of agreements already contain a carve out in respect of protected disclosures (ie whistleblowing) but our view is that this no longer goes far enough (particularly as not all regulators are covered by the Public Interest Act, nor indeed are the police).
  • Do not let an NDA interfere with any reporting requirements you might have. This will obviously vary depending on your type of organisation. For law firms, this will be set by the SRA; for charities the Charity Commission; for financial institutions the Financial Conduct Authority etc. In cases of sexual harassment, it is not always easy to identify when the duty to report is triggered, particularly as individual cases are so fact sensitive. A lot will depending on what amounts to "serious" misconduct and the extent to which facts are sufficient to conclude someone has or "may have" committed an offence. A first step should be to refer to any relevant regulatory guidance. However, given the serious ramifications of reporting, both for employers and individuals, we would suggesting getting advice if in doubt.
  • Consider whether gagging clauses in particular cases warrant additional – potentially more imaginative – carve outs. For example, an obligation to investigate allegations of harassment or report them to the Board, even if the case has settled (to prevent issues being swept under the carpet, and to build up a fuller picture of issues in your workplace). Or, include an obligation to disclose information about earlier complaints about a particular perpetrator in the event a subsequent complaint is made against them (to allow you to identify potential patterns of behaviour by individuals). Whether or not these type of clauses are appropriate will very much depend on individual cases and the culture of your particular organisation, but may be worth considering.
  • Avoid seeking to rewrite history. For example, unless allegations are manifestly untrue, do not exert pressure on victims to agree to warranties stating that the alleged harassment did not take place.

Incidentally, in light of the SRA's warning notice, and on the back of the work we do on safeguarding, we have decided to set out expressly what disclosures are permitted in our precedent settlement agreements. Although not a strict requirement (by the SRA or otherwise), we feel it is better to be on the crest of the best practice wave on this particular issue.

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