Government Consultation on the use of NDAs in Settlement Agreements

The APPG welcomes the announcement made today by the Minister for Small Businesses, Kelly Tolhurst MP, that the government will set out legal proposals to clarify the use of Non-Disclosure Agreements (NDAs) in the context of misconduct in the workplace. Beyond the workplace, however, NDAs are also regularly used by financial institutions to prevent one aggrieved party assisting another aggrieved party, or to supress potentially criminal conduct. The use of an NDA has moved from a legitimate agreement between two parties to a tool of abuse used by a stronger part to intimidate the weaker party, and the APPG will be calling on these laws to extend beyond just the workplace.

Kevin Hollinrake MP, Co-Chair of the APPG on Fair Business Banking Said: “it is high time that scrutiny is placed on the use of NDAs in circumstances in which there is a clear imbalance of power between parties. Evidence suggests that they are used as a tool of abuse to scare victims into silence and supress vital evidence from emerging.”

NDAs are still being used within settlement agreements, even where there are concerns that the individuals may not feel able to discuss the misconduct they have experiences with the regulators. Pertinently, settlement agreements in the Griggs Review contain these gagging clauses that may not be enforceable, but which have the effect of scaring the victims of the fraud into silence, potentially leaving the full extent of the fraud from being hidden.

Past experience with the Payment Protection Insurance (PPI) mis-selling scandal shows that NDAs have the potential to supress evidence for many years. In 1993, a Bristol Crown Court judge ruled against TSB Bank plc in the first ever PPI case. The bank insisted on a 10-year NDA as part of the settlement agreement. This prevented the exposure of the PPI mis-selling scandal for another ten years, after which a ‘super complaint’ was lodged after a copy of the judgement was sent to the Office of Fair Trading and Citizens Advice Bureau. If an NDA had not been in place, the PPI scandal could have been stopped much earlier, saving billions of pounds.

The APPG is also concerned that NDAs are being used as a tool to silence whistleblowers when they speak out against misconduct. Kevin Hollinrake MP recently wrote to António Horta-Osório to notify him of a case in which a whistleblower, after writing to Lloyds’ executive and non-executive directors with evidence of signature forgery, was threatened with litigation to intimidate the individual into signing an NDA that would have prevented them from speaking out to the public with the evidence of signature forgery.

The APPG is calling on the Government to legislate so that:

  • NDAs cannot be used to prevent individuals speaking to MPs, regulators, Government advisors, investigative reporters;
  • NDAs cannot be used to prevent someone from assisting in a connected party’s litigation;
  • NDAs cannot be used to contract out of future misconduct;
  • NDAs can only refer to the matters to which they directly relate.
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