That Uncertain Smile: the Law Society Practice Note Again (sorry)

The legal profession’s slow awakening to the problems of NDAs, has led to a familiar call for certainty. The argument goes something like this: we’re more than happy to advise our clients properly, and to draft ethical NDAs, if only someone can tell us what an ethical NDA looks like. They want clear rules on what ‘the protection of the rule of law and the administration of justice’ or what perverting the course of justice means making those concepts more certain. Do that, they opine, and they’ll happy tell their clients, Roolz is Roolz, and stop drafting clauses that chill whistleblowing rights, take advantage of employees who’s lives are sometimes in the process of being ruined, and threaten enormous clawbacks for breaching non-disparagement clauses of, ahem, uncertain impact.

I don’t doubt the sincerity of the view. Who’s against greater certainty?* But I do think it’s a position which needs to confront its own irony. Plenty of lawyers have said to me they are perfectly happy putting in clauses that are of uncertain enforceability, for instance. They know that pretty much all the legal risks of that uncertainty are borne by the employee’s exiting the organisation: the occasional Zelda Perkins or Peter Hain aside. An uncertainty in the law is not an excuse for not leading ethically, professionally through that uncertainty.

But I don’t want to leave the confronting of irony there. If lawyers, and indeed the Law Society, or the ELA, want more certainty, it is within their gift to deliver it. A sensible model of the core terms of permissible agreements would help a great deal, reducing the costs for clients, and the stress for lawyers into the bargain. It’s been two years fellas, what’s been keeping you? But let me turn to what the Law Society has done, and in particular, the Practice Note. It fails badly on the certainty front.

The best example of the Law Society failing to offer advice which is either best practice or more certain is quite a simple one. In the Practice Note, they say this:

Blocking the reporting of information that is relevant to regulating a sector is likely to be unacceptable to regulators.

Anyone familiar with lawyers will know that ‘likely’ is like catnip to some lawyers who will read it as saying the door is sometimes open to you blocking information to regulators, or coming close to it. Why not say, Blocking and inhibiting the reporting of information to relevant regulators is forbidden. Or at least say it is bad practice (if they do not agree it is forbidden). They are both more certain statements than how they have it currently. And incidentally, they would be much wiser to remind the frazzled solicitors reading such guidance who might not read the SRA guidance too that blocking or inhibiting the flow of information to regulators is potentially, I would say likely, to be professional misconduct and may be criminal misconduct. A solicitor fully on top of this brief would know that, but most are not fully on top of this brief. I have seen many expert lawyers who have no grasp at all of the public justice offences they may be committing when doing this work (the most spectacular mistake I have seen is not an NDA case, but it does involve a potential contempt, they defended themselves by saying, essentially, they were out of their depth. Leading law firm, very experienced lawyers, massive case, incroyable!). The potential consequences for their members go a bit beyond other regulators being a bit peeved, which might be how it reads to some at the minute.

A second example from the Practice Note is this one:

For clarity, solicitors may include clauses that express, in clear simple English, exceptions or restrictions on any broad duty of confidentiality

May. For a note that purports to be best practice, this well behind what solicitors tell me is best practice. To a man and woman they say they routinely include exceptions to broad duties of confidentiality to carve our whistleblowing obligations and the like. The Note should say unequivocally that such clauses should be included, not may. And that these carvouts should be prominent, clear, an unequivocal. I emphasise this by saying I am told by employment lawyers that some (other) lawyers deliberately exclude such carveouts or make them obscure to assist their clients should they want to ‘chill’ the exercise of whistleblowing rights. There is a real problem which the Law Society could address by bearing clearer. It is a problem they would almost certainly be aware of, and it seems they have chosen not to.

Again, it might have been wise to point out that with an absence of such carve-outs, there is a very serious risk that a party to an NDA will be taken unfair advantage of and that the likely and intended effect of the agreement will be to purport to preclude protected disclosures. Unenforceable. Contrary to SRA guidance. Again, also risks perverting the course of justice and a breach of the professional principle to protect the rule of law in the administration of justice, as well as other principles. Instead, we get an almost whimsical, you might like to think about kind of approach, that seems to cut across the SRAs guidance. More uncertainty, not less. Less leadership, not more. Poorer practice, not better.

The Note goes on to say:

In some cases, such permitted disclosures may be expressed to be subject to restrictions, but again solicitors must consider their regulatory duties as laid out in the Code before restrictions are imposed

This is very dangerous advice. We do not really know, as a matter of law, what restrictions if any can be legitimately placed on the making of permitted disclosures. The Perkins Weinstein agreement sought to put conditions on whether, how and when she could talk to the police, for instance. I suspect they were all, or almost all, improper and unenforceable. Again there is no explicit canvassing of the risks in the Practice Note.

And again, the Practice Note is behind the curve of what most practitioners tell me is best practice in one respect, which is that the guidance does not deal with clawbacks: indemnities for breach which place a complainant in breach of an NDA immediately and significantly in the debt of their erstwhile employer.

A Law Society keen to reflect best practice and to increase certainty would at the very least discuss these clawbacks, and if wanting to be clear and reflective of what – it seems to me to be- the consensus position of employment lawyers is, which is that clawbacks may be unenforceable as penalties, are usually unfair, and should therefore not be deployed.  They should also discuss the risks of inhibiting the exercise of whistleblowing and other similar rights in strong terms. Instead, silence.

There are problems of providing incomplete, and therefore, misleading advice too. The Law Society’s Practice Note says:

Confidentiality clauses, which may include terms commonly referred to as non-disclosure agreements (NDAs), within settlement agreements are used to stop commercial information from being shared inappropriately and to avoid reputational damage, including where potentially serious concerns have been investigated and a fair process has been followed (regardless of whether or not the allegations are substantiated).

This is a minefield. They could add certainty to the guidance, as well as correct this misleading statement by pointing out that an investigation that substantiated allegations of criminal wrongdoing should take great care not conceal that wrong for fear of concealing evidence contrary to section 5 of the Criminal Law Act 1967. Or because at common law there can be no confidence in an iniquity. If the allegation is substantiated one cannot create an enforceable obligation of confidence in it. They are saying such a term might be created. But as an unenforceable term it is in breach of the SRA’s guidance in its warning notice because it is advocating a clause known to be uneforceable. The Law Society could say that and be more certain. At the moment they appear to be advocating the possibility of something which is properly regarded as unlawful

They say this too:

It would also not be normal to prohibit disclosure to any professionals for legal or tax advisory, medical or therapeutic reasons. If a client is keen to include such restrictions, then solicitors must consider their regulatory duties in the Code and have regard to the Notice during drafting.

A more certain approach would be to say they cannot do this. But in any event, it would be significantly better, and more useful, to remind the solicitor at this point that they are responsible for their own actions. They cannot simply rely on the client’s instructions to justify an NDA if it is professionally improper. The last sentence might be read as implying they can rely on this excuse. Solicitors really do need reminding of this point. The I was only following instructions claim is made often in conversations with me, and it is not a defence to professional misconduct. The Law Society lets their members down by not reminding them of things they often forget, or do not know about.

One last example, for the sake of making this rather long blog post comprehensive:**

It may be reasonable to expect the employee to take steps to ensure that a third party will respect the confidential nature of the information, though the drafter may want to consider whether any expectations may unnecessarily restrict the party from obtaining support.

This is a rather opaque little paragraph which could be much clearer and more helpful. Certainty is aided sometimes by examples. This Practice Note is abundant in their absence, and here is one point where they might help a great deal.

I repeat my view. The Practice Note needs radical surgery or withdrawal. The Law Society tried to do something helpful, and failed. I have a pretty good idea of why that is, and the answer is politics and not the public interest. They have done better work elsewhere on this topic; but it is the Practice Note that most practitioners will reach for, if they reach for anything. It is a note that is vague, misleading, unhelpful and bad. In both sense of the word. But it also increases uncertainty where there is none, or there does not need to be some. Being much better is possible.

 

* Actually – sometimes – I am; certainty in some contexts is often the friend of the rule avoider,  but that’s a whole other debate and does not deliver what it promises.

** I realised I missed at least one further problem. The PN says this, “It will not normally be appropriate to fail to provide a copy of relevant terms to parties who are obliged to comply with them.” Why not say it is not appropriate? Or if they think there are circumstances where it might be appropriate, give examples? I’ve not heard a single lawyer defend not giving an employee a copy of their NDA. Writing the obligation in this mealy-mouthed way suggested the door is more ajar on this practice than the SRA’s guidance which is unequivocal, “They must also not prevent someone who has signed an NDA from keeping a copy of the agreement.”

 

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