The use of NDAs – how far can you go following Government guidance?

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Following an inquiry launched by the Women and Equalities Select Committee (“WESC”) of the UK Parliament in 2018 into sexual harassment in the workplace and its subsequent report of 11 June 2019, the Department for Business, Energy & Industrial Strategy (“BEIS”) launched a further consultation on 4 March 2019 in response to the recommendations set out by WESC. BEIS proposed a number of key measures to prevent the unethical use of non-disclosure agreements (“NDAs”) and confidentiality clauses to silence victims of workplace harassment or discrimination. On 22 July 2019 the Government issued a response to BEIS’ proposals, which confirms it will legislate to implement a number of key changes to the use of NDAs and confidentiality clauses.

The current position

Confidentiality clauses and NDAs are common provisions drafted into employment contracts and settlement agreements that seek to prohibit the disclosure of information. Whilst it is recognised that these clauses can, and mostly do, serve a useful and legitimate purpose both during and after employment, for example to prevent disclosure of sensitive and proprietary information to competitors, there is a concern that these clauses have been used to prevent victims of harassment and discrimination from speaking out, or to cover up examples of these cases.

The new measures

In order to combat this, the Government has avowed to implement key guidance on the drafting of confidentiality clauses and NDAs that will be as follows:

  • Confidentiality clauses and NDAs will not be able to prevent individuals from reporting a suspected crime to the police, regulated health and care professionals or legal professionals.
  •  ­Confidentiality clauses in settlement agreements and NDAs must clearly set out their limitations. The limitations of a confidentiality clause or NDA in an employment contract must be included as part of the mandatory written statement of particulars.
  •  ­The independent legal advice which an individual must obtain on entering a settlement agreement, under s203(3) of the Employment Rights Act 1996, will be extended to include specific advice on the nature and limitations of any confidentiality clauses or NDAs. The SRA has produced updated guidance to help inform the relevant independent adviser.
  •  ­There will be new enforcement measures for confidentiality clauses and NDAs that fail to comply with the new legal requirements. Some suggested measures are that additional compensation will be available to individuals – in certain circumstances – when they bring an employment tribunal claim and it is subsequently found that the requirements for a clear and express confidentiality clause have not been met.

Steps to take

The Government will formally respond to the WESC inquiry in due course, although no timing has been given. According to the Government’s published response dated 22 July 2019, the relevant new legislation will be brought forward "when Parliamentary time allows". However, these proposals have considerable cross-party support and so are likely to come into force soon and employers should be prepared.

Employers should undertake a review of how confidentiality clauses and NDAs are currently being used, and in what circumstances, ensuring they do not fall foul of these new requirements, and that they are only being used for legitimate reasons. The wording of these clauses should be carefully evaluated, and any necessary changes made to bring them into line with these new proposals. Solicitors and other legal professionals, such as in-house counsel, should familiarise themselves completely with these new proposals and the SRA guidelines so that any future settlement agreements should be drafted in a manner adhering to these proposals, in addition to ensuring that, when advising those entering into settlement agreements, they explain clearly the limitations of any confidentiality clause. It is also useful for employers to be aware of the new requirements to which their legal advisers should be adhering.

Laura Livingstone

Laura Livingstone Partner, Head of Employment

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