James Arnell is a partner at Charterhouse. He writes in a personal capacity.
The UK media are, understandably, shouting from the rooftops this week about non-disclosure agreements after Peter Hain’s controversial use of Parliamentary privilege.
It is understandable. Because NDAs get in the way of a good story, we should expect plenty of noise around the issue. That’s all well and good. What is less good is the way it is framed.
In every media outlet I have seen or heard, the framing of the issue is as follows: NDAs are used by companies to force employees who may have suffered harassment, bullying, unfair treatment, and so on, to stay silent.
There are a couple of major flaws in this.
A “company” is not a real thing. Companies do not “do” anything. People working for companies do things. Real living and breathing people sign every one of these NDAs. So, unless we assume that all these people are unethical, bad people, the framing of the issue as “bad company (for which read bad person working for company) vs good victim” is too simplistic.
The media’s framing assumes that employees are always the ones being forced to sign NDAs. In my experience, it is sometimes the other way round.
An unscrupulous employee can quite easily extort money from a company by making allegations, without disclosing supporting evidence, and the company’s decision-makers face Hobson’s choice. They can pay off the claimant and secure an NDA, or they can “call the claimant’s bluff”. If they call the employee’s bluff, they get months and years of adverse publicity as the allegations are aired, they get months and years of distraction from day-to-day business, and, if they lose the case, their company suffers serious reputational damage.
Given that the facts are rarely clear to the decision-makers in these cases (who are almost invariably not the accused executives), they take the safe route and pay for an NDA. The victim in cases where the facts were unproven is the company and not the employee.
Again, because a company is not a real thing, this really means that it is the other employees and shareholders of the company who are the victims. These are real people, who have in these cases had money extorted from them.
The good news is that, thinking it through from the employer’s point of view, I arrive at the same conclusion as those who focus on the employee. These NDAs should not be allowed to cover harassment and bullying. They should be limited to commercially sensitive information – IP, pricing, customer data, etc.
If every decision-maker at every company knew that it was impossible to use an NDA to silence an allegation, this would provide useful incentives. For harassing, bullying managers, it would be clear that their employers would not protect them with an NDA and they would have to expect to face justice. For the unprincipled false accusers, they would know that they would have to prove any claim in court. There would be no opportunity for extortion.
I have no idea whether this would lead to more harassment cases or fewer. That depends how many are real and how many are simply attempts to make some money. I suspect that it would lead to a lot more cases and therefore pressure on the courts, who would have to process all the real claims.
This would be good for transparency but, unless accompanied by a substantial increase in spending on employment tribunals, it would cause a massive backlog of cases, which would be unfair for employees and employers alike.
In this debate, therefore, it is important that we do not satisfy ourselves simply with outlawing these NDAs. We also need to ensure that the tribunal system is funded to allow rapid dispute resolution.
I think it would be sensible to withhold the names of claimants and employers in such cases until the facts have been established, to avoid prejudicing careers and company reputations.
Finally, there is one unspoken and very uncomfortable aspect of all this which should be put on the table. As things stand, the majority of allegations (true and false) will be silenced with an NDA, at a price. This means that the risk of an allegation can be priced upfront. For a given profile of employee, there is a given probability of an allegation, and a likely cost of silencing it.
I have a daughter, and this worries me a lot. If the majority of claims are from women, who suffer the most harassment and bullying, then female hires come with a higher cost attached upfront. The risk is that this leads to a reluctance to hire women, instead of a determination to root out harassing males. This is obviously wrong-headed, but it risks becoming a commercial reality.
Three things are therefore key as we wait for NDAs to be disallowed. First, we must of course root out our bullies and adopt zero tolerance of harassment. Second, we must avoid running scared of hiring female employees, even if they come with a higher risk of claims. Third, everyone should be very careful not to lose sight of the fact that some claims are baseless, and that those who make false claims, whether under the #metoo banner or otherwise, are undermining efforts to root out bad behaviour in the workplace and may be prejudicing others’ chances of employment.
The sooner we remove the financial incentive for false claims, the better. And the sooner we move away from this “bad company, good claimant” simplistic view of life, the better, too.