Non-disclosure Agreements and Confidentiality Clauses

Non-disclosure agreements (NDA) are used to seal the lips across a range of situations in nearly all industry sectors. Organisations, particularly the many industry sectors that depend on constant innovation and new developments, need to ensure that their research, discoveries and breakthroughs are protected. Also, important business transactions could be completely derailed if rivals learned about the deal before it was completed.

When NDAs are used to prevent an individual from revealing abusive behaviour the validity of using such an agreement such is now being called into question. The revelation that Harvey Weinstein wielded robust NDAs to prevent his victims speaking out has posed an ethical dilemma as to whether criminal behaviour should be able to be shielded by an NDA.  His victims have now been released from the confines of the agreements they signed.

NDAs are frequently used in marriage or relationship break-ups when one party has a high media profile to prevent “tell-all” books in the future causing reputational damage.  In an unusual about-face the former wife of Sir Elton John, Renate Blauel, is suing Sir Elton for his alleged breach of the NDA signed on their divorce.  It would be reasonable to assume that the NDA was principally drafted to protect the name of Sir Elton and any off-set any potential reputational damage that may stem from any private revelations that his former wife may expose.  Nick McEwen, an associate in Giambrone’s corporate and commercial team, commented “an artist such as Sir Elton John like many others depend on the goodwill of their many fans. If highly adverse information is leaked it can swiftly result in significant loss of revenue and good name that cannot easily be restored” he further pointed out “commercial organisations rarely give the benefit of the doubt to performers whose reputations have been tarnished as the impact on profits is often swiftly felt.”  Sir Elton has made the mistake of failing to consider that the NDA signed by both parties applied equally to both parties.

Similarly, confidentiality clauses are commonly added to settlement agreements drafted when an employee leaves a company having experienced discriminatory or some other poor treatment at the hands of their employer.  The inclusion of a confidentiality clause is intended to prevent the terms of the settlement agreement becoming common knowledge to prevent reputational damage and discourage other employees from making claims (with or without merit) in the hope of receiving a financial settlement. In a recent High Court case, Duchy Farm Kennels Limited –v- Steels, where the payments being made under the settlement agreement to Mr. Steels ceased because Duchy Farm Kennels believed Mr. Steels had breached he confidentiality clause in the agreement and therefore they were no longer obliged to continue making payments to him.  The High Court did not consider the confidentiality clause was a condition of the contract as it was not expressly stated to be so. The main aim of the contract was to ensure that Mr. Steels waived his claims against the company. 

Preventing an individual from speaking out by use of a legal gag must be carefully managed as the reputational damage is far greater if the attempt to hide bad behaviour is revealed.