In response calls for better regulation of Non-Disclosure Agreements (NDAs) from groups including the Women and Equalities Committee and the Equality and Human Rights Commission, the Department for Business, Energy and Industrial Strategy published the outcome of a consultation paper in July 2019 detailing significant proposals for reform.
Whilst NDAs remain in the spotlight in the post #Metoo world, if used appropriately they can have a benefit in helping to achieve early resolution of sensitive issues and allow both parties to move forward. However, the use (and misuse) of such arrangements have recently been brought into sharp focus, particularly where allegations of sexual harassment in the workplace are involved.
Changes in the Pipeline
Following the outcome of the consultation, the Government has decided to proceed with most of the Committee’s original proposals for reform including:
- Adopting legislation so that confidentiality clauses cannot prevent victims of sexual harassment from making disclosures to the police, regulated healthcare professionals or legal advisors. The aim of this recommendation is to ensure that disclosures can be made by victims to professionals who are also bound by the duty of confidentiality, and facilitates the reporting of suspected crimes.
- Drafting legislation which ensures that confidentiality clauses in both employment contracts and settlement agreements are clear, specific and set out the extent of their limitations.
- Currently, individuals who sign a settlement agreement must receive independent legal advice in order for it to be valid although there is no requirement for the legal advisor to confirm that they have specifically advised on the limitations of any confidentiality clauses. The intention is for this to change.
- Employees will be able to claim additional compensation in an employment tribunal for deficient confidentiality clauses, in certain circumstances.
- Following a Government announcement that a new Code of Practice would be developed by the ECHR, there will be a renewed focus on the prevention of sexual harassment and discrimination in the workplace.
Further consultation will be taking place to look at strengthening existing legal protections under the Equality Act 2010.
Impact on Employers
Whilst the stated intention is to introduce new enforcement measures more generally, it does not confirm whether non-compliant confidentiality clauses in settlement agreements will be treated as void. However, the new rules intend to introduce a new onus on employers to make it explicitly clear that NDAs will not be used to cover up potential crimes and businesses will be expected to protect employees from unwanted harassment and discrimination.
This article was co-written by: