Fillip for NDAs as Court of Appeal gives the Green light
Friday 9th November 2018
Non-disclosure agreements (‘NDAs’) are in the media spotlight, and so seemed a topical starting point for this update, more so in light of the Court of Appeal decision upholding the terms of several NDAs in ABC & others v Telegraph Media Group Limited.
NDAs are common in settlement agreements between employers and employees. Essentially they are contractually binding confidentiality commitments whereby parties agree not to reveal certain information. This might include the nature of the complaints that underlie the settlement, or the terms of the agreements, including sums paid. If the terms of the NDA are breached then damages for breach of contract would be the appropriate remedy.
Five employees made allegations of ‘discreditable conduct’ against a senior executive at the two claimant companies (collectively the ‘Claimants’). All of these allegations ended with the parties entering into settlement agreements.
The Daily Telegraph recently contacted the Claimants requesting comment on a story it proposed to publish in relation to the various allegations. The Claimants sought immediate injunctive relief.
Decision and comment
In reaching its decision, the Court of Appeal had to balance the press’ right to freedom of expression with the complainants, and businessman’s, right to privacy. The Court’s considerations offer reassurance, and guidance, to employers and drafters of NDAs.
The Court noted that parties are generally free to determine for themselves what obligations they wish to be bound by. The principle of legal certainty should mean that, all other things being equal, the courts will not interfere.
Accordingly, it said that it is likely ‘to tell with particular force’ where: (i) the agreement is freely entered into without improper pressure, (ii) both parties have the benefit of independent legal advice; and (iii) the agreement allows for disclosure of wrongdoing to police or other regulators. In such circumstances a court is more likely to prefer the right to privacy over freedom of expression.
The Court of Appeal also noted that NDAs play an important and legitimate role in ending disputes, particularly in an employment context. Where this is the case, there is an even greater incentive to ensuring the parties remain bound by their agreement.
NDAs are not by default objectionable, and can be in the genuine best interests of all parties. The Court of Appeal has demonstrated the continued relevance of them in dispute resolution. The Court clearly had no issue upholding the terms of a properly drafted NDA. As such, NDAs should include specific provisions permitting lawful disclosures, for example to police, or under whistleblowing protections. Additionally, employers should be aware of the potential imbalance of power, and ensure that employees have received independent legal advice prior to settlement.