The largest bank in the United States – JP Morgan – has been fined $18 million for breaching whistleblower protection rules – one of the most significant penalties imposed by the American financial regulator. The US Securities and Exchange Commission (SEC) reported that between March 2020 and July 2023 J.P. Morgan Securities’ clients were asked to sign agreements that prevented them from communicating any potential wrongdoing to the regulator.
As concerns grow in the UK that wealthy corporations are abusing the law to silence their critics, the story offers a timely lead on what the UK could be doing better.
The use of NDAs
With the use of non-disclosure and non-disparagement agreements (NDAs) growing year on year your former employer has the power to control what you can say or do long after you cut ties or end your contract. So what to do if you witness wrongdoing and want to blow the whistle?
In theory at least, UK law is on the side of the angels. Under current whistleblowing protections confidentiality clauses in any agreements can’t be used to intimidate or silence whistleblowers. But as things stand the law on confidentiality agreements is vague, and reform is long overdue. There is a mist of legal uncertainty in this area and going up against big business on your own presents a dramatic inequality of arms.
In reality, breaching a NDA still takes an awful lot of courage. The law is complex and facing your ex-employer is horribly daunting. For a start, you do not know whether the law will protect you until you’ve actually broken the agreement. As Protect identified before the House of Commons Women and Equalities Committee’s examination of the use of NDAs, it can be difficult for a would-be whistleblower to feel confident the law will protect them. Even if the law does apply in your case, it is still incumbent on the whistleblower to break the agreement and then raise a defence in court if they are sued, or go to the Employment Tribunal alleging whistleblower victimisation. Faced with the looming threat of legal action by a powerful employer, many would-be whistleblowers with a non-disclosure agreement in place will lose their nerve and keep quiet.
Better protection needed
What is missing is a robust enforcement mechanism for the protection: an outside body capable of identifying and taking action where non-disclosure agreements are being misused to silence whistleblowers. The Solicitor’s Regulation Authority (SRA) has recognised the problem, but there are concerns that its warning notice doesn’t go far enough. “That notice has been ignored”, says anti-NDA campaigner Zelda Perkins, who points out that SRA guidance has not substantially changed since 1998, when she was coerced into signing a paralysing NDA by her former employer, Harvey Weinstein.
This brings us back to America, and the SEC’s far more muscular approach. The SEC can forbid firms from taking any action to prevent a person coming forward with concerns, including contractual provisions. Yet, unlike in the UK, there is a public body with the powers and inclination to do something. The JP Morgan fine is the latest in a string of such enforcement actions taken against firms who try to use NDAs and other contractual tricks to silence whistleblowers.
This shows two clear advantages over the UK’s relatively weak legal provisions. First, there is greater legal certainty for those subject to dodgy contractual provisions. The SEC’s willingness to identify and call out breaches of the law relieves a potential whistleblower from the stress and anxiety of having to work out whether their agreement is legally valid.
Second, a proactive regulator gives whistleblowers a much-needed ally. This kind of enforcement action means that whistleblowers who have signed a restrictive NDA don’t have to take on the legal risks alone. Compared to the SRA’s warning notice, the SEC’s fines will be far more effective in changing behaviour.
When you are worried that you will be sued into bankruptcy for speaking up, it is not enough to know that the letter of the law on your side – there must also be public authorities willing and able to take action themselves. Whistleblowers play an essential role in bringing crime, corruption and malpractice to light, but the misuse of NDAs is allowing them to be silenced. UK regulators must take a stand to enforce the law and bring this corrupt practice to an end.