Professional Conduct and the Impact of #MeToo – What should Law Firms do to stay on the right side of the line? The #MeToo movement has shone a light on sexual misconduct and harassment, which has been around for a long time, but is only now being increasingly addressed. To date the main focus has been on the alleged perpetrators and the employing companies. However, this is now being widened to lawyers who advised these parties. Whilst historically the Solicitors Regulation Authority (SRA) did not take much note of cases involving sexual misconduct, in the wake of the Harvey Weinstein case, this has changed and the SRA is increasingly focussed on this.
– This article features in the Solicitors Journal print edition.
The Regulatory Framework
By way of context, the SRA’s (currently) 10 mandatory principles for solicitors include: upholding the rule of law and proper administration of justice, acting with integrity, acting independently, behaving in a way which maintains public trust in the lawyer and the provision of legal services and complying with legal and regulatory obligations. Breaches of these conduct obligations require a referral to the SRA who, in turn, may refer the matter to the Solicitors Disciplinary Tribunal, with sanctions including fines and, in serious cases, a striking off. The current SRA Handbook is expected to be replaced this year by the new SRA Standards and Regulations.
NDAs are commonly used in a commercial context, typically in the case of a proposed merger between companies when confidential information is shared between the parties to allow negotiations to progress. Why then is the use of NDAs in the employment context different? Typically the NDA will be included in a so-called settlement agreement (which used to go by the name of compromise agreement) which provides a statutory mechanism to settle potential statutory employment law claims between an employer and employee. In order for this settlement agreement to be valid the employee in question will have to be advised by an independent lawyer. This independent legal advice should provide some protection to the employee, as they will be advised on the agreement and its provisions, including the NDA wording. The difficulty in this context is, however, the inequality of bargaining power; and in cases of sexual misconduct allegations, the employee is likely to be in an even more vulnerable position than on a usual exit and the reputational pressure on both parties will be greater.
In many cases an agreed NDA, if properly approached and addressed, can be in both parties’ interest. Particularly where the employer has taken action against an alleged perpetrator of sexual misconduct and addressed the underlying issues giving rise to any sexual harassment or misconduct and the employee simply wishes to move on and draw a line under the issue, this can be an appropriate approach.
The difficulty arises when the underlying issue is not addressed. The reason NDAs are now in sharp focus is that these agreements, in some cases, have included wording to prevent sexual misconduct from being reported to the police and the appropriate authorities. The employee in question is in effect silenced with a threat of sanctions if the NDA is breached. The perpetrator is left to continue acting with impunity for years, with many further victims, as was the case with Harvey Weinstein. The A&O partner who advised on this particular NDA agreement in 1998 in relation to Harvey Weinstein’s conduct has been investigated by the SRA for the last year and has now been referred to the Solicitors Disciplinary Tribunal.
The SRA Warning Notice and the Law Society Practice Note
The SRA issued a warning notice on the use of NDAs in March 2018. This set out that whilst NDAs may be used appropriately, they should not prevent the subject of the NDA from going to the SRA or other regulator or law enforcement agency about conduct which might be otherwise reportable. The SRA was further concerned that there should not be a failure to notify the SRA of misconduct or a serious breach of regulatory requirements, including wrongdoing by the firm. NDAs should also not be used as a means of improperly threatening litigation or other adverse consequences.
The Law Society also issued a Practice Note on NDAs and confidentiality clauses on 7 January 2019. This focussed on the use of confidentiality provisions that have been drafted as part of an agreement to end a workplace relationship. The Practice Note essentially stated that lawyers need to consider the SRA Code of Conduct and the 10 mandatory principles and also the SRA Warning Notice. It was also noted that any clauses that may suggest that the reporting of any criminal offence is prevented by an NDA will be legally unenforceable and that any failure to comply with the SRA Warning Notice may lead to disciplinary action.
A New Risk for Law Firms and their Lawyers
The referral of the A&O solicitor to the Solicitors Disciplinary Tribunal evidences a new risk for legal advisers and their firms. This risk is that advice they may have given to parties before the start of the #MeToo movement and the shift in public perception and opinion, will now be revisited through today’s lens, with the related reputational and professional conduct risks. And, whilst sexual harassment was never ok, it was effectively ignored or swept under the carpet for a very long time.
The Future Approach
NDAs remain potentially useful to both parties who sign up to them, but must be drafted in a way which observes the professional conduct principles. What that means is that a potential whistleblowing claim or a complaint to the authorities such as the police or a regulator cannot be excluded and a residual risk for the employer remains. There are, however, already a number of employee claims which cannot be waived by a settlement agreement (such as for example a personal injury claim in certain circumstances), so this is not in fact a fundamental change. The employee’s adviser must also be very clear in their advice to the employee on the NDA wording to ensure its meaning is properly appreciated and this is appropriately drafted.
Historically the SRA and the SDA may have focussed more on financial misconduct by solicitors and issues such a misuse of client money. They are clearly taking a different and wider approach to conduct issues and are creating a higher bar for lawyers to act with the professional conduct rules in mind in all their professional dealings. This is likely to extend to all aspects of legal advice given not just NDAs.
In terms of remedial next steps for firms to consider it will be key to remind and train their lawyers at all levels, including partners, of the applicable professional conduct rules. These rules will have changed since these lawyers first trained and qualified and are subject to ongoing changes. As with Financial Services compliance and increased regulation, the regulatory oversight of lawyers is likely to become more central to law firm management and risk and any proper risk assessment will need to ensure regular training and audits.
Finally, the #MeToo movement has changed public perception of what is acceptable and respectful behaviour between colleagues and this has shifted attitudes fundamentally and that is to be welcomed. What has also changed is a feeling that people who have been at the receiving end of sexual harassment are now able to speak up. This may in future no doubt still extend to more professional advisers who were involved in and advised on the more egregious past cases of sexual harassment.
Bettina Bender, Winckworth Sherwood LLP