NDAs: New proposals crack down on misuse of confidentiality clauses
The government has announced new legislation to curb the “the misuse of Non-Disclosure Agreements (NDAs)” after consultation and strong pressure from advocacy groups alleging confidentiality clauses are used to cover up workplace harassment and assault.
NDAs are a part-and-parcel of doing business, but according to some critics, a lack of clear rules on how they are to be used makes it too easy for businesses to sweep unseemly conduct under the rug.
The retail tycoon Philip Green’s example is instructive: last year, the Telegraph published a story detailing harassment accusations against an unnamed, prominent businessman. Lord Hain later used parliamentary privilege to single Green out by name.
Since then, details around “gagging orders” and hush money have since leaked out. In one case, Green paid a former employee £1m to stymie complaints of sexual harassment.
The businessman attempted to sue the Telegraph for breaching the confidentiality agreements, although he later dropped the case. For many critics, the case was emblematic of an NDA culture that had spiralled out of control.
In November 2018, the Women and Equalities Select Committee (WESC) launched an inquiry into the use of NDAs following on from a 2018 report on sexual harassment in the workplace.
WESC published their report on the use of non-disclosure agreements in discrimination cases on 11 June 2019.
In a statement, the minister for small business, consumers and corporate responsibility Kelly Tolhurst said the majority of businesses use NDAs appropriately. But, she added, there was an issue with “a handful of employers using NDAs to cover-up criminal acts in the workplace, including sexual harassment, assault and racist discrimination”.
The new rules will attempt to target this misuse. The updated legislation will:
“Ensure employers make clear the limitations of a confidentiality clause, in plain English, within a settlement agreement and in a written statement for an employee, so individuals signing them fully understand what they are signing and their rights.”
“Extend current legislation so that individuals signing NDAs will get independent legal advice on the limitations of a confidentiality clause – including making clear that information can still be disclosed to police, regulated health and care professionals, or legal professionals regardless of an NDA.”
“Introduce new enforcement measures to deal with confidentiality clauses that do not comply with legal requirements - for example, an NDA in a settlement agreement that does not follow new legislative requirements will be legally void.”
In its response, the government said it would “produce guidance on drafting requirements for confidentiality clauses”, adding that: “Any confidentiality clause in a written statement that does not meet the new drafting requirements will permit the individual in certain circumstances to be eligible for additional compensation, when brought before an employment tribunal.”
Generally speaking, the government’s proposed legislation places far more onus on employers to make NDAs explicit and to explain the terms in plain English. Businesses will need to be “clear on the limits of any confidentiality clause in a written statement of employment particulars”.
Again, any worker that receives a confidentiality clause in a written statement that does not meet the drafting requirements (that is, isn't clear about their rights) will be entitled to receive additional compensation in an employment tribunal award
Andrew Conway, a partner at Lawrence Stephens Solicitors, explained that while current legislation already gives employees who sign NDAs the ability to report wrongdoing to the police, "the problem stems from the fact that many employees are unaware of this".
“The proposed legislation seeks to address this gap in the employees’ knowledge,” Conway said. “It will impose an obligation on employers to ensure that employees are made fully aware of their continuing right to report crimes to the police or to other professionals, such as doctors, lawyers and social workers, even though they may have signed an agreement which purports to exclude that right.”
He added, “With employees becoming more and more aware of their continuing right to report wrongdoing and offending employers less able to ‘buy’ their former employees’ silence, we would expect to see a continuing shift in many workplace cultures.”
Commenting on the proposals, Annabel Kaye, argued that particular scrutiny should be reserved for the public sector or providers of services using taxpayers’ money.
“When it comes to using taxpayers’ money to settle claims there ought to be a central register of the nature of the claim and the amount and the organisation so that the Audit Office can track whether particular departments are settling excessive numbers of claims, or at higher than usual value.”
Rebecca Hilsenrath, chief executive at the Equality and Human Rights Commission, welcomed the government’s proposals. She said in a statement given to AccountingWEB that the “new legislation will help to end ambiguity about employees’ rights and stop the misuse of NDAs to protect corporate and personal reputation”.
She added, “The use of NDAs is only part of the problem of workplace harassment and discrimination, and employers must step up to protect their employees from this appalling behaviour before it happens.
“We are developing new guidance on NDAs and tackling harassment which will provide further clarity for employers and help them create safe and supportive working environments.”