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Ethical & Non-enforceable Non-disclosure Agreements

In a previous article, Tips to Avoid Unethical Usage of Research Results, we briefly explored how to engage in ethical research in which Non-Disclosure Agreements (NDA) were mentioned. Now, we will go a bit deeper to understand the ethics of NDAs. We shall explore which clauses should and shouldn’t be included in an NDA. We shall also analyse how to develop ethical solutions for your company. 

NDAs play a significant role in the commercial world and are frequently used between businesses to push a project forward, within the employment relationship, and between collaborators such as yourselves. Despite their importance and frequent use, some NDAs can hold an abusive role or may be contrary to legal and ethical principles. Watch out! 

Particularly in employment contracts, professionals get excited about new opportunities and are immediately presented with an NDA which they are eager to sign. This approach does not give enough time to analyse the details of the NDA they are signing. As an employee, you may be engaging in agreements that simply won’t hold up in court, or could find yourself in an ethical dilemma. The same can be said from a company perspective in the writing process. For the purpose of this article, let’s look over a few scenarios in which ethics is involved or may be un-enforcable. 

Terms that are potentially unenforceable or unethical

Unethical

Harassment and Discrimination Clauses 

In certain circumstances, NDAs may be used for inappropriate and unlawful reasons such as detering employees from reporting matters, including any form of discrimination, harassment, sexual harassment, or whistleblowing. No workplace should sustain a culture in which individuals cannot report behavioural wrongdoings. The existence of such protections within the employment NDA would discourage employees from taking legal action or file reports against their coworkers. Furthermore, it would create a culture of mistrust in the working environment. 

The #MeToo movement has been a large propagator for change, compelling companies to exclude such clauses within employment NDAs. In the US, many states have passed laws to prohibit or restrict employers’ use of NDAs when resolving claims of sexual harassment

Whistleblowing Clauses 

An NDA cannot prevent an employee from disclosing information in the case that it is of public interest. For example, a clause within a confidentiality agreement cannot have the power to prevent an employee from reporting a cover-up of financial wrongdoing to a legal authority. Ethically speaking, such clauses should not exist in the NDA, but rather, the company should have a whistleblowing policy that promotes the disclosure of wrongdoings in the company. 

Un-enforceable

Not Defining Enforcement and Penalties 

Without the consequences for failure to comply, what good is the NDA?  Under these circumstances, there are no legal grounds for being held accountable. If any dispute were to arise in case one of the parties had violated the terms, it would be unclear how to solve the matter. In turn, leading to lengthy litigation or having to settle by other means. 

Lack of Clarity 

Definitions within the NDA need to be clear in order to ensure the agreement is to be followed. An NDA should be reasonable and specific in order to be effective. The individual in the agreement needs to know what is considered confidential or not. Without an explicit definition of the term ‘confidentiality’ the agreement would prove challenging to enforce. This also applies in the case that confidentiality is defined too broadly. Should litigation arise, NDAs with unclear or non-existing terms of confidentiality would not be upheld in court. Courts can invalidate agreements that are overly oppressive or too expansive

Clerical Errors

The smallest mistake  could potentially lead to the invalidation of the agreement. Expressions such as ‘Ltd’ or ‘Co’ must be included to assure the NDA’s success. Also, making sure the spelling of the name of the company or individual who is signing is correct. Furthermore, in the case that the company has both a trading and legal name, both need to be included. This will avoid any unnecessary ambiguities that could lead to the invalidation of the NDA. 

Richard Moorhead, UCL Professor of Law and Professional Ethics published a report setting out some questions to consider when drafting an NDA. These questions can help drafters determine whether the NDA will be ethical or whether they deny people’s rights. 

  1. Is the NDA being used to deny people their rights that are inalienable?
  2. Are there clauses that could be used to obstruct, deliberately or accidentally, investigation by the police or regulators?

Key Takeaway

Employers should consider NDAs on a case-by-case basis. They should take into account the following: whether confidentiality clause is truly needed, if there are ethical issues, and the consequences of using those clauses. The following clauses within an NDA should definitely be avoided as provided by the ACAS Guidance Non-disclosure agreements report published in February 2020: a matter of routine, to cover up inappropriate behaviour or wrongdoing, to mislead someone, to stop someone from reporting discrimination, harassment, or sexual harassment, to stop someone from whistleblowing or to avoid a legal requirement to make a referral to a regulatory body, government agency or to the police.

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