2nd November 2017
As widely reported in the media over the past couple of weeks, a large number of women have come forward to say that they have been sexually assaulted or harassed by Hollywood producer, Harvey Weinstein. As the story has developed, it has come to light that, rather than freely choosing to remain silent over the alleged behaviour, some victims have been prevented from talking about their encounters with Mr Weinstein as they signed non-disclosure agreements (“NDAs”) in return for financial sums.
Zelda Perkins, a former assistant of Weinstein’s, decided to breach the terms of the NDA she signed so she could talk about the issue. Further, a group of Weinstein Company employees have written an open letter asking their employer to release them from NDAs that stop them speaking publicly about what they have experienced and witnessed.
This topic raises some important issues for employers regarding the use of confidentiality provisions in settlement agreements, and whether they are actually worth the paper they are written on. And should the use of these gagging clauses be limited if it means that serious issues such as sexual misconduct or harassment can be covered up?
Confidentiality clauses are included in settlement agreements as standard practice, to prevent employees from discussing any issues surrounding their employment or its termination with anyone except their legal adviser, spouse or civil partner, HMRC, regulatory authority, or as required by law. There is also usually a liquidated damages clause included in such agreements to enable the employer to claw back all or part of the financial sums paid out under the agreement (and often the employer's costs of having to do so as well) in the event that the employee breaches their confidentiality obligations. This is usually enough to put an employee off talking about their reasons for leaving a job and/or accepting a financial settlement.
However, an employee could still discuss confidential issues without breaching a confidentiality clause in a settlement agreement if they are making a protected disclosure under whistleblowing legislation. This is because a clause in an agreement is “void in so far as it purports to preclude the worker from making a protected disclosure”. This means that an employee cannot contract out of their entitlement to make a protected disclosure and a confidentiality provision will not circumvent this.
Therefore, if an employee reasonably believes that, for example, a criminal offence has occurred or is likely to occur (e.g. sexual assault) or there was/is a danger to the health and safety of any individual (perhaps a risk of harassment to other colleagues) and they believe that disclosure of the confidential information is in the public interest, then the employer may have no course of action against the employee for disclosing the relevant confidential information. And remember, as mentioned in our recent bulletin regarding the Chestertons whistleblowing case, “in the public interest” can just mean only a small group of people where the allegation is serious, the wrongdoing is deliberate and/or the wrongdoer is a prominent figure.
Employers are unlikely to stop using confidentiality clauses in settlement agreements going forward, and in many cases it suits both parties to keep the terms agreed between themselves and their respective reputations intact. However, employers should be aware that, as with the Weinstein claims, their inclusion of such clauses in an agreement is not a cast-iron guarantee that an employee won’t speak out in the future, either in breach of the settlement agreement or under whistleblowing legislation.
The contents of this update are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this update. © Mundays LLP 2017.
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