The Government this month have launched a consultation into the use (or misuse) of confidentiality clauses in employment contracts and settlement agreements.
In the midst of the #metoo campaign, it follows the House of Commons Women and Equalities Select Committee’s report on sexual harassment in the workplace last July, which raised concerns that employers might use confidentiality clauses or non-disclosure agreements (“NDAs”) to intimidate victims of harassment and discrimination into keeping quiet about wrongdoing. The consultation paper however recognises that this is only a “minority” of employers.
The Women and Equalities Select Committee suggested that confidentiality clauses or NDAs are often complex and employees are not clear on their rights. Such clauses can be drafted in such a way as to give the impression to employees that they have no rights to make disclosures of any kind about any wrongdoing, including criminal behaviour.
Settlement agreements and the associated confidentiality are often an incentive, both for the employer and the employee, to settle prior to taking a dispute to the Employment Tribunal and they can prevent reputational damage on both sides. They not only protect sensitive commercial information, but also the personal information of employees where allegations of a personal nature are involved, both against the employee and individuals of the employer.
The current legal position on confidentiality clauses is that they do not override criminal or discriminatory behaviour. They cannot prevent employees from:
- Reporting criminal offences to the police;
- Making protected disclosures (“whistleblowing”); or
- Asserting their statutory rights, such as to bring claims in the Employment Tribunal (although waiving the right to these claims is usually the purpose of a settlement agreement).
In addition, for a settlement agreement to be valid, the employee concerned must take independent advice on the contents of the agreement, often provided by a solicitor. Employees should already understand their rights in relation to confidentiality before signing. So what are the proposed changes?
The consultation does not propose any material change to the law, but is instead seeking views on how to ensure employees know their rights in relation to confidentiality and NDAs and to encourage greater clarity and transparency in their wording. Suggestions have included standard form wording, extending the requirement for independent advice to specifically include advice on confidentiality, the wording of such clauses to specifically state what rights they cannot override and making the clauses void in their entirety should they be non-compliant when enforced in Court or Tribunal.
Employers should therefore be wary of casting the net too wide when it comes to confidentiality agreements, however, clear wording and proper advice should mean that confidentiality will retain its legitimate place in employment agreements.
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