Time to break the silence? Why the government is taking action on non-disclosure agreements.

They have become the legal weapon of choice for the rich and powerful: non-disclosure agreements, used to silence the victims of sexual harassment and worse from an overbearing boss.

New proposals to prevent employers using “gagging clauses” to conceal sexual harassment, intimidation and racism complaints have been unveiled by the government. The plans, to be included in a consultation, could lead to new legislation that would prevent non-disclosure agreements (NDAs) being used to prevent victims from reporting serious complaints to the police.

NDAs, or gagging clauses as they are also known, were originally designed to stop employees sharing trade secrets when they moved to another company, but in recent years they have become synonymous with hushing up claims of bad behaviour in the workplace such as sexual harassment, bullying and other abuse, some of it potentially criminal.

Ministers have decided to act following high-profile cases including that of Sir Philip Green, chairman of Arcadia Group, who is alleged to have used NDAs to prevent several former employees from speaking out about their experiences of bullying and sexual assault. The consultation also 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.

Many organisations, including government departments, use NDAs incorporated in Settlement Agreements to legitimately protect confidential information. Settlement agreements and the associated confidentiality they offer are often an incentive, both for the employer and the employee, to settle prior to taking a dispute to the Employment Tribunal because they can prevent reputational damage on both sides as they not only protect sensitive commercial information but also the personal information of employees where allegations of a personal nature are involved.

However, these clauses can be so binding, so all-encompassing, that victims, in return for a financial payout, are prevented from talking about allegations of conduct ranging from systematic bullying, intimidation, 
and abuse to sexual harassment and even assault.  Many women – and men for that matter – will feel that it is easier to take the pay-off and the gagging clause that comes with it, rather than try to fight the usually wealthy and powerful boss and their legal team and risk losing everything.

It is not therefore surprising that some ministers say that NDA’s contained in Settlement Agreements are being abused by a “very small minority” of employers to intimidate whistleblowers and conceal harassment and discrimination, physical threats and racism. Announcing the move, business minister Kelly Tolhurst said the proposals were part of wider plans to increase fairness in the workplace. “Many businesses use non-disclosure agreements and other confidentiality agreements for legitimate business reasons,” she said. “What is completely unacceptable is the misuse of these agreements to silence victims, and there is evidence that this is becoming more widespread. Our proposals will help to tackle this problem by making it clear in law that victims cannot be prevented from speaking to the police.”

The Women and Equalities Select Committee suggested that 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.

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”)
  • Asserting their statutory rights, such as to bring claims in the Employment Tribunal

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. Clear wording and proper advice should mean that confidentiality will retain its legitimate place in employment agreements.