Just how bad is insurance’s culture problem? Thanks to non-disclosure agreements (NDAs), it might or might not be impossible to tell – and businesses need to think twice about how they use the binding agreements in non-financial misconduct cases.
The Treasury Committee Inquiry into Sexism in the City, which claims to have “evidence of the widespread use and abuse of nondisclosure agreements in harassment cases”, has consistently brought up NDAs while grilling financial services leaders.
The issue, according to Treasury Committee MPs and others, is that NDAs, which are a legally binding contract, are often used to silence victims and leave perpetrators of bullying and harassment unpunished and free to continue offending.
Not everybody agrees that NDAs are rampant in financial services and industry more broadly.
“They should never ever be used to silence and I don’t see them used in that way,” Aviva CEO Amanda Blanc told MPs.
So who’s right, the committee or the CEO?
The answer is, nobody (except perhaps lawyers) really knows how prevalent NDAs are in sexism, harassment and discrimination cases.
You might hear rumours of an insurance or financial services misconduct NDA, but good luck proving it exists. Maybe you’ve signed one – but of course, you can’t talk about it.
The very nature of NDAs makes trends around them near impossible to track. Rigorous data analysis on how NDAs are being used in culture cases is practically non-existent, given the pervading silence that is part and parcel of the deal, which may involve a financial settlement or guarantee a reference.
NDAs are the ultimate transparency contract killer.
Evidence that does exist is scant and largely anecdotal, perhaps because those who have broken their NDAs do so at their financial and reputational peril even when they are the ones who should be being protected. But there have been some collection efforts.
Twenty-seven per cent (27%) of UK accounting, banking and finance employees who have shared experiences on Speak Out’s open source dashboard reported having been silenced by an NDA – that’s 11 people out of 41.
Campaign Group Can’t Buy My Silence, spearheaded by Harvey Weinstein whistleblower Zelda Perkins and Canadian lawyer Julie McFarlane, has collected a series of international stories from individuals who have had bad NDA experiences.
It’s not all about covering up criminal activity – in one financial services story, a woman recounted being pushed out of work and required to sign an NDA after returning from maternity leave.
NDAs that are in play should at very least allow individuals to talk to the authorities and to blow the whistle, but the Solicitors Regulation Authority (SRA) fired a warning shot on this as recently as 2020.
Just this year, more than 100 individuals and organisations answered a Legal Services Board (LSB) call for evidence on NDA misuse, with responses including accounts that people had felt pressured into signing agreements; had been affected by a power imbalance; and that vulnerable individuals had felt exploited.
The “questionable usage of NDAs continues”, Maria Miller MP, who has previously brought forward a Private Members Bill seeking to abolish harassment and abuse NDAs, said in a September 6, 2023, parliamentary debate.
If financial services companies are using NDAs to silence victims, as it’s been suggested they are, they are walking a dangerous tightrope.
NDAs have the potential to forge cultures of secrecy, protect “bad apples” in the words of MPs, and perpetuate a cycle of culture calamities.
Even if you think that the #MeToo movement has been the 21st Century’s McCarthyism, there are business reasons that NDAs in non-financial misconduct cases do not make sense.
Businesses that use NDAs run the risk of keeping shareholders in the dark over settlements, Can’t Buy My Silence has warned.
Meanwhile, boards can face having the wool pulled over their eyes.
Given we’ve just witnessed the CBI reputational implosion and member exodus, with board members expressing “shock” and the organisation’s president Brian McBride expressing “bewilderment” over toxic culture, assault and rape allegations, this ought to hit home.
Overly stringent NDAs with provisions included for “chilling effect”, in the words of CM Murray partner Beth Hale, also run the risk of being unenforceable.
If the government is sitting on piles of evidence that NDAs are being misused in business, then it needs to get on and legislate around this, as it already has on educational settings.
In the interim, though, businesses and industry associations should take a bold step for themselves, get on board and visibly consign the harassment NDA to the dustbin.
To be very clear, nobody is asking for an end to all NDAs, which serve a valuable purpose in protecting intellectual property and genuine business secrets. Nor are they asking for an end to victim confidentiality.
What they are proposing is a glaring opportunity for insurance businesses to lead the way and set an example for clients that might be set on covering up their bad behaviour with NDAs instead of tackling the risks head on.
It’s time to kill the misconduct NDA.
What’s your view on the use of NDAs in insurance and financial services? Leave a comment below.
