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NDA – ignoring!

Recently, some employees have spoken publicly about sexual harassment in breach of NDA confidentiality obligations. 

This raises the question as to what a company can do about this since the reputation of the company may be damaged by such a disclosure.

The employer would have a contractual claim against the employee – although whether the employer would take such a step given the PR implications is questionable. Any legal action against the employee would be in the public domain and may cause further damage to the company’s reputation.

The company would also need to consider all of the implications of taking any formal action (eg the cost of managerial time involved in litigation and the uncertainty of the outcome). Even a threat of legal action against the employee might attract negative press.

To bring a successful claim for breach of contract, the company would have to demonstrate that it suffered a loss as a result of the breach. This could be difficult to prove. Sales and income might fall due to any bad press received, but the company may have difficulty in proving the causal link between this fact and the employee breaking the gagging clause.

The best approach is to try to limit any reputational damage by actively investigating the matter as soon as any allegations are raised. This could include conducting a disciplinary investigation and disciplinary meeting with the alleged perpetrator. If the employer reasonably concludes that the allegations are true, it may wish to impose sanctions on the perpetrator, possibly even dismissal.

Accordingly, employers should review and update any procedures and policies on issues such as bullying and harassment. In addition, they should actively remind staff that they are obliged to adhere to these policies. Employers may wish to provide further training to employees if necessary. Such steps might limit the reputational damage if an employee goes public. See article [2018] 196 Employment Law Journal 13.

 

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