The Presidents Club scandal sheds light on controversial gagging orders

Ben Power
British Prime Minister Visits Belfast
Even the Prime Minister has been forced to comment that she will look into the issue (Source: Getty)

The events at the Presidents Club dinner have stirred up controversy over women’s rights, potential criminal actions, and the rights and wrongs of a returned donation.

The regular use of non-disclosure agreements – also referred to as NDAs or gagging clauses – by the wealthy and powerful to keep their activities out of the public eye has also come to the fore.

With 130 waitresses at the now infamous dinner all forced to sign lengthy NDAs (apparently without time to read them), even the Prime Minister has been forced to comment that she will look into the issue.

NDAs are a legally enforceable way of preventing someone from sharing confidential and sensitive information. In other words, if you leak the information, you can expect to be sued.

For many years, these agreements have been widely used by employers, most commonly via confidentiality clauses in contracts of employment.

What are the limits?

Clearly, NDAs are being wielded by bosses as a stick to prevent disclosure of improper conduct. However, the assumption that NDAs will be effective is a serious flaw.

While a “gagging clause” may terrify the employee into silence, under UK law it cannot always be used to prevent public interest whistle-blowing about serious wrongdoings.

A confidentiality clause also generally won’t work where it is being used to cover up improper conduct.

And while the power of the deterrent effect of the NDA cannot be underestimated (particularly when wielded on the letterhead of an aggressive law firm), their use can also cast the employer in a bad light.

Each case is different, but there must be a serious question mark over the enforceability of the Presidents Club NDAs.

When can an NDA be used?

Obviously, not every activity amounts to a serious wrongdoing, or even improper conduct. In this case, a business or individual might want an NDA to keep activities out of the public eye.

NDAs can be a great benefit in these circumstances, but should be bespoke and drafted in a clear and precise manner.

The agreement should clearly define the scope of the confidentiality obligation; too little detail and it may not provide enough protection for the business.

What if the there was no NDA in place?

It may be tougher to get over the line, but it is possible to enter into an NDA after the event, and before the public is aware. One way of doing this with an employee would be via a settlement agreement, but it could be done through other forms of legally binding contract.

In return for a sum of money, the individual would agree to specific confidentiality and “no derogatory remarks” provisions.

While this will not technically prevent legitimate whistle-blowing, the money paid out to the individual may be reclaimed if they breach the agreement, which will act as a further deterrence.

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