The future for non-disclosure agreements

8 Apr 2019 By Paul Quain

What do government proposals on confidentiality clauses in settlement agreements mean for employers? Paul Quain reports

Imagine the scenario: an employee, who is having performance issues at work, makes an allegation of sexual assault by the CEO of the company. She says he was making passes at her after a drunken office party, which then led to something more serious. 

She raises a grievance, but also offers to resign in exchange for a severance payment. The company agrees to pay her, but in return asks her to sign a settlement agreement to say that she will not sue the company. That agreement also asks her to keep the whole matter confidential.

Should a company be allowed to do this? Does it help individuals get compensation for things which have gone wrong or does it lead to cover-ups of serious misconduct?

The well-publicised stories about Harvey Weinstein and Philip Green have led people to question whether such provisions in agreements are being used by powerful people to shut down talk about them and thereby allow those who bully and harass employees to continue to do so.

Partly in response to this, the government recently published a consultation paper on confidentiality clauses in settlement agreements. There has been a lot of talk over the past 12 months about what are often referred to as non-disclosure agreements (NDAs). Actually, the government title is more accurate. What is being referred to is a tradition of requiring both sides in a dispute to agree to confidentiality and sometimes to not making derogatory comments about the other side when parties finally settle a dispute. 

The government’s consultation is on two specific proposals to: 

  • prevent clauses from stopping people going to the police    
  • require that for a confidentiality clause to be valid, the employee must have received specific legal advice from a qualified lawyer on what it means and its limitations

These changes will have limited effect on a scenario like the one outlined above (or indeed in most cases). The law as it stands already permits employees to go to the police, and indeed to press charges, even if they have signed an agreement to keep matters confidential. Settlement agreements already require legal advice for the waiver of claims to be fully binding, so it would be unusual for an employee to sign an agreement without talking to a lawyer.

However, the changes would remove any ambiguity on the employee’s rights here and make it explicitly clear to employees that they can go to the police.

Overall, this is likely to discourage misuse of confidentiality clauses without completely outlawing them or risking the removal of a way for employees and employers to resolve their differences outside the courtroom. However, it does not protect employees from conduct which might be unconscionable but falls below the threshold of being criminal and something you would go to the police over. 

An employee who is not selected for promotion because of the colour of his or her skin probably cannot go the police but might want to make this public. If they had signed up to an agreement with a tight confidentiality clause, they are unlikely to be able to talk about this without breaching their agreement. The government’s proposed changes do not address this issue and would not affect any conduct which is perhaps unacceptable but not criminal.

Perhaps the government’s proposals are as far as we can go to meet the criticisms of the recent public outcry without completely discouraging cases to be settled at all. Perhaps they will help address a badly needed cultural change about acceptable behaviour for those in authority at work. Or will this turn out to be only a damp squib?

Paul Quain is senior partner at specialist employment law firm GQ|Littler

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