In a move to protect workers rights, the UK government has set out new legal proposals to clarify the use of Non-Disclosure Agreements (NDAs) and also ensure that any worker agreeing to a settlement agreement not only understands his or her rights, but also receives independent advice on signing. It is an important step to counter an abuse of power that has become entrenched within the system - as I covered in November 2018 on Board Talk. But whether it succeeds in its purpose will in the end depend on changing existing corporate culture.

Announcing the new legal proposals today, Business Minister Kelly Tolhurst said: “Many businesses use Non-Disclosure Agreements and other confidentiality agreements for legitimate business reasons, such as to protect confidential information. What is completely unacceptable is the misuse of these agreements to silence victims, and there is increasing evidence that this is becoming more widespread.”

The government’s new proposals, she added, “will help to tackle this problem by making it clear in law that victims cannot be prevented from speaking to the police or reporting a crime and clarifying their rights.”

Evidence of NDA misuse in the UK includes examples where victims of harassment or discrimination have been silenced using legal agreements, for example suggesting that a worker cannot whistle-blow despite the fact that no provisions can remove a worker’s whistle-blowing rights, said the UK government.

In addition, the Department for Business, Energy and Industrial Strategy (BEIS) stated that through an NDA or Settlement Agreement, employers “could insist that a worker is unable to discuss an issue with other people, a doctor or a therapist. This can leave victims afraid to report an incident or speak out about their experiences, leaving others exposed to similar situations, and putting customers and other businesses at risk.”

This is a description of workplace culture that has repeatedly jumped out at us from UK media coverage of businesses from retail to financial services.

But when the UK government states that today’s proposals “to extend the requirement to receive legal advice to cover limits on confidentiality clauses and that signatories must be provided with a clear overview of their rights……..will help end this unethical practice”, is it missing a beat when it comes to the ethics around the use of NDAs ?

As I wrote last November: “Where there is great economic inequality, financial incentives given to sign an NDA are deeply questionable.” Money muddies the ethical waters - we decided in Britain not to give financial incentives to whistle-blowers for that reason. Why, then, are NDAs allowed to be linked to financial settlements at all ?

If you are worried about your financial security, or if you fear that your actions will lead to your becoming unemployable, you are not going to wait to be told your rights before the big pay-off that is promised if you sign on the dotted line. It is hard, too, to see how these legislative changes will do much to change corporate culture that allows sexual harassment in the first place.

“The landscape of women’s employment has been littered with the misuse of NDAs in order to hide harassment, protect perpetrators and silence victims. We really welcome the measures set out today by the Government which will help to empower victims and ensure no one is forced to sign a gagging clause against their will. But regulating NDAs alone will not prevent workplace sexual harassment” said Rebecca Hilsenrath, Chief Executive at the Equality and Human Rights Commission.

She added: “To fundamentally change workplace cultures and ensure everyone enjoys a working environment that allows them to reach their full potential, employers must take steps to prevent sexual harassment from happening in the first place. We believe that such a duty should be made mandatory for all employers.”

The UK Government is keen for this latest measure to be seen as part of its commitment to “fairness” in its modern industrial strategy. As the latest measures were announced, Penny Mordaunt, Minister for Women and Equalities, said “Sexual harassment at work is illegal, yet this disgusting behaviour is something that many women experience today. I want to make it clear to anyone who thinks they can bully and harass people at work, the UK government, good employers and the public will not accept this. We will act to make sure that workplace rights are protected for everyone.”

But emotive language does not, on its own, unite people divided by economic inequality, particularly when such inequality is in danger of being seen as becoming endemic. The Chairman of Arcadia is still referred to as Sir Philip Green. The fine for Barclays boss Jez Staley in the whistleblowing case was described as “pitifully low.”

We need better much alignment in UK business between working practices and corporate culture, the corporate governance and ethical standards to which we say we aspire - and the way in which we regulate to ensure adherence to those standards.

When it comes to whistle-blowing, the number of whistle-blowing complaints made to the Financial Conduct Authority (FCA), has soared, with a sizeable proportion of the concern focused on how companies treat their customers, the Financial Times reported yesterday.

A total of 1,755 complaints from whistle-blowers were received in 2018 compared with 1,420 in 2017. Of the complaints, 246 related to treating customers fairly, up from 74 the preceding year — a leap of 232%, reported the FT. “Despite the increase in complaints, the FCA only acted on 121 disclosures that it thought were within its remit in the 2017-2018 financial year, according to its annual report” it added.

The new rules for Senior Managers have been tightened by the FCA under its Senior Manager Certification Regime (SMCR) and are still being rolled out to the entire financial sector. But if whistle-blowing continues to increase as a result of them without a corresponding reaction from the regulator , the measures are unlikely to have a positive effect on trust in business. This is particularly true in financial services, where we are still feeling the impact of a crisis of over a decade ago.

If you look at the mis-selling of Payment Protection Insurance (PPI) by the industry, you begin to count the cost of getting NDAs wrong.

I am told by the All-Parliamentary Group On Fair Business Banking (@APPGBanking) that the first ever PPI case was in 1992-93 (Bristol Crown Court 93/10771). It was brought by Mr L W Price against TSB Bank plc. It was judged that the total payments of the insurance premium were almost as high as the total benefit that could be claimed.

A ten year NDA clause was put in place as part of the settlement. After 10 years, a copy of the judgement was sent to the Office of Fair Trading and Citizens Advice Bureau. Soon after that, a super complaint was raised - it might have been the most expensive NDA ever drawn up. This is something being looked at by APPG Banking as part of the ongoing attention being paid to fairness in banking.

“The use of an NDA has moved from a legitimate agreement between two parties to a tool of abuse used by a stronger party to intimidate the weaker party. They are regularly used in financial institutions to prevent one aggrieved party assisting another aggrieved party, or to suppress potentially criminal conduct” said Heather Buchanan, Director of Policy for the APPG on Fair Business Banking.

“NDAs signed in settlements made ‘on the court steps’ ensure that common law does not develop in an equitable way…the bad cases make bad case law and good cases are suppressed” added Ms Buchanan, on behalf of the APPG on Fair Business Banking.

It brings to my mind the fictional character Mr Bumble created by Charles Dickens and his memorable thought about “the law is an ass whose eye should be opened by experience.”

Image Credit: Adeolu Eletu on Unsplash