England: Regulator plans action over NDA misuse

England: Regulator plans action over NDA misuse

Regulators in England and Wales are considering reforms to address the misuse of non-disclosure agreements (NDAs).

Earlier this year, the Legal Services Board (LSB) sought evidence on NDAs amid worries that lawyers were helping to conceal harassment, discrimination or abuse.

The LSB said its primary aim was to determine why certain lawyers seemed to neglect their professional ethical responsibilities when tasked with formulating NDAs for influential entities or individuals.

A call for insights on the issue received over 100 responses.

Respondents said that NDAs had been utilised to hide actions ranging from sexual assault to fraud and tax evasion. These agreements were predominantly made between employers and employees, where the latter, dependent on the former for financial recompense or references, were at a disadvantage, especially when negotiating with influential and well-resourced parties.

Many respondents said they felt that they had “no other option” but to sign an NDA, but later regretted doing so. They also pointed out that the implications and terms of NDAs were frequently not clarified and that the reasons provided for their endorsement could be ambiguous at best.

The LSB also expressed concern over the fact so few people were aware of their legal rights when it comes to NDAs and that they are entitled to independent legal advice. Many respondents wanted regulators to consider whether the misuse of NDAs could include failing to ensure that people understood their legal options.

“There were accounts where individuals reported feeling pressured into signing agreements, where an imbalance of power led to a detrimental outcome for an individual and where individuals in vulnerable circumstances felt this was exploited to the benefit of the other party,” commented the LSB.

The regulator concluded that there existed a “strong rationale” to contemplate policy alternatives for what they termed as a “strengthened and harmonised regulatory approach”.

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