The recent article in Westminster Confidential (by David Hencke ) serves as a thought provoking and balanced critique of the Solicitors Regulation Authority (SRA) and its handling of complaints related to the misuse of non-disclosure agreements (NDAs). While acknowledging the SRA’s recent intervention in the PAYONE case, where they found a breach of professional ethics by the law firm representing Payone, Hencke argues that this action is merely a drop in the ocean compared to the widespread problem of NDA misuse.
The article highlights a concerning disparity between the high volume of complaints received by the SRA and the limited number of cases where action is taken, especially when large law firms like Orrick UK are involved. This perceived disparity in outcomes raises questions about the SRA’s consistency in addressing complaints related to NDA misuse, particularly in cases involving powerful entities, and highlights the real-life challenges the regulator faces in balancing its duty to protect the public with the need to maintain a fair and impartial approach to all parties involved.
Hencke’s article reveals a pattern of dismissed complaints from whistleblowers who felt pressured into signing NDAs that restricted their ability to speak out or seek redress. This perpetuates the power imbalance between employers and employees and creates a chilling effect on those who dare to challenge corporate misconduct. The recent case involving Payone, where the SRA found that the proposed settlement agreement could have discouraged regulatory complaints and hindered the whistleblower’s access to justice, further underscores this concern.
SRA Orrick outcome
“We found that the firm breached Principle 2 of the SRA Principles, which requires the firm to act in a way that upholds public trust and confidence in the solicitors’ profession and in legal services provided by authorised persons”
The SRA’s confirmation of Orrick’s breach centers on two key points:
- The settlement agreement drafted by Orrick mandated the withdrawal of existing complaints to regulators, including The Pensions Regulator. The SRA acknowledged that this could mislead regulators and potentially influence their decisions, thereby undermining their function.
- A clause, pertaining to the Pensions Regulator, was criticised for its potential to prevent future complaints, hindering independent regulatory scrutiny. The SRA found this problematic, as it could obstruct the proper administration of regulatory complaints.
The SRA, while acknowledging these breaches, downplay their severity by arguing:
- The Pensions Regulator was already aware of the issues, so withdrawing the complaint wouldn’t have affected their actions.
- The breach was an isolated incident, and no actual harm was caused.
- The firm demonstrated its intent to comply with the Warning Notice on NDAs.
- The initial communication clearly stated the terms were subject to a final agreement and included exceptions for disclosure.
Some may argue that the SRA’s justification for dismissing the severity of Orrick’s actions, particularly the claim that withdrawing the complaint wouldn’t affect the Pensions Regulator’s actions, raises an eyebrow. While the regulator might have been aware of the underlying issues, the intent behind the clause, which sought to dissuade the whistleblower from pursuing compaint of breaches of the law, is arguably more concerning than its potential practical impact.
It is, however, difficult to determine what an appropriate penalty for Orrick’s actions might be. It seems the SRA considered their cooperation with the investigation and the generally well-drafted nature of the settlement agreement as sufficient to mitigate the seriousness of the breach. This raises the question of whether the SRA’s response adequately addresses the potential chilling effect such clauses can have on whistleblowers and whether it sends a strong enough message.
It’s particularly important for employees who might find themselves facing a corporate behemoth armed with an NDA that seemingly stretches into eternity, (Orrick’s own FAQ page, rather ironically, notes there’s “no set expiration” for such agreements.)
While Orrick ultimately followed Payone/Worldline’s instructions, the SRA’s findings suggest a struggle at Orrick to balance client advocacy with ethical obligations, possibly indicating a need for improved training on handling sensitive matters like NDAs and whistleblowing. The SRA has advised Orrick to ensure their staff are familiar with relevant regulations and guidance.
“Taking into consideration all of the above, our advice to the firm was that it must make sure that the firm and its staff are familiar with our Standards and Regulations and associated guidance, particularly on the use of non-disclosure agreements:
www.sra.org.uk/solicitors/guidance/non-disclosure-agreements-ndas/
The firm does not have the right to apply to us for a review of this decision.”
The Westminster Confidential paints a bleak picture of the SRA efficacy in tackling the misuse of NDAs, raising serious concerns about their ability to protect the public and whistleblowers. His findings indicate that the SRA has taken action in fewer than five cases involving NDAs in the last four years, despite receiving an average of 10,000 complaints annually.
Highlighting the disparity, Hencke reveals, “Figures released to David Change (he is on X @DavidChange12) where the sole complaint was about the misuse of Non-Disclosure Agreements amount to just 41 over the last four years.”
Of these, 13 were not even investigated, and the number of resulting warning letters, advice letters, and public or private rebukes remained under five for the entire four-year period.
These statistics, while concerning, should be interpreted cautiously due to the SRA’s own caveat: they did not comprehensively examine whether complaints about other solicitor activities also included NDA misuse allegations, so the actual number of NDA-related issues could be higher. However, even with this caveat, the figures underscore the complexities the SRA faces in balancing its regulatory duties with safeguarding individual rights and the public interest, a delicate balancing act necessitating ongoing vigilance.
Sources:
- Legal Services Board. (2024, February). THE MISUSE OF NON-DISCLOSURE AGREEMENTS: CALL FOR EVIDENCE THEMES AND SUMMARY OF EVIDENCE.
- Hencke, D. (2024, August 16). The Solicitors Regulation Authority isn’t ” fit for purpose” to protect the public and whistleblowers. Westminster Confidential.
- Barwell, J. (2024, August 14). The SRA: A Regulator Failing in Its Duty to Protect the Public. Legal Lens.
- (2024, August 14). Orrick, Herrington & Sutcliffe in Regulatory Breach Over Worldline Payment Firm’s Non-Disclosure Agreement. Loopline Media
- Hencke, D. (2024, August 24). The extraordinary failure by the Solicitors Regulation Authority to police lawyers who misuse non disclosure agreements to silence whistleblowers and employees. Westminster Confidential.
