Legal

Is time up for NDAs?

19 Nov 2018 By Andrew McDonald

Andrew McDonald asks whether non-disclosure agreements still have a place at work, or if they need to be banned

The debate around the use of non-disclosure agreements (NDAs) continues to rage on following the recent court injunction involving Sir Philip Green (pictured above), and the use of NDAs as tools for the confidential settlement of disputes. But are NDAs completely unsuitable for use in the workplace, and would a ban on the agreements cause difficulty for businesses up against spurious employment tribunal claims, which they seek to settle confidentially?

Last year’s #MeToo and Time’s Up movements shone a spotlight on a culture of sexual harassment that was prevalent across many industries. In all its forms, sexual harassment is abhorrent, yet it seemed those alleged to be responsible were being protected from the consequences of their actions, while vulnerable employees were left without protection.

Even before the recent furore, the agreements were due to be debated in parliament, and there are calls across many different industries for their use in employment contexts to be substantially reduced. This ranges from a total ban in all discrimination and harassment cases, to restrictions on using these agreements where the activity amounts to criminal conduct.

In reality, the vast majority of discrimination claims that reach employment tribunal do not include allegations of sexual harassment.

In the era following the abolition of employment tribunal fees, some organisations have felt there is a greater risk of disgruntled former employees bringing spurious discrimination claims against them. Even if a claimant loses, they are unlikely to have to pay their former employer’s legal fees for defence. Understandably, some employers are therefore concerned over accountability in the case of weak claims.

Where an employer fights a spurious claim and wins, it is often a pyrrhic victory – one which incurs extensive legal fees and a huge amount of senior management resourcing. Additionally, these cases tend to attract a high level of press interest, which could concentrate on allegations, rather than the rationale behind judgments which rule in the business’s favour.

This is where NDAs can come in to play. Faced with these challenges, businesses will often try to see if a claim can be settled for a modest amount either under a settlement agreement or an ACAS COT3; these will always include a confidentiality clause, which is a form of NDA. In these circumstances, the use of NDAs are not to protect sexual harassers, but for the simple expedient of avoiding the payment becoming general knowledge.

The complete banning of NDAs therefore would result in matters which could otherwise be settled, having to undergo a full hearing before a judge. Employment tribunal systems would be clogged, and businesses and claimants would face great expenses of time and legal fees.

Businesses, across different industries and sectors, must commit to stopping sexual harassment and eradicating workplace cultures that may have previously allowed abuse to thrive. In the case of NDAs, while stopping serial offenders is crucial, legislators will have to tread carefully to ensure they don’t remove the assistance NDAs provide all parties, ensuring any new regime still allows sensible settlements to be reached with confidentiality maintained.

Andrew McDonald is a partner at BLM

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