With Covid-19 occupying the minds of most employers, it is easy to forget changes in the employment landscape that occurred before the UK went into lockdown, such as the developments on non-disclosure agreements (NDAs) and confidentiality clauses, which followed the high-profile allegations against Harvey Weinstein and Philip Green.
These brought increasing reports of the use of NDAs and confidentiality clauses by employers following instances of workplace sexual harassment, leading to calls for action to prevent employers using such methods to conceal allegations of wrongdoing. In response, the UK government pledged to end the ‘unethical’ use of NDAs.
In 2019, the Department for Business, Energy and Industrial Strategy (BEIS) launched a consultation to understand how best to prevent the misuse of NDAs, while guidance also emerged from the Law Society, the Equality and Human Rights Commission (EHRC) and Acas.
While the momentum on this issue has slowed for obvious reasons recently, the use and misuse of NDAs and confidentiality clauses is likely to come back into focus soon, with further regulation in the area likely.
What is an NDA?
NDAs are typically used by businesses to protect commercially confidential information or trade secrets from being shared. When a provision is included in a settlement agreement that seeks to protect the employer – eg, from disclosure of information about sensitive allegations, the circumstances leading up to the termination of the arrangement or settlement sums – that would typically be called a confidentiality clause.
However, as both NDAs and confidentiality provisions seek to prohibit the disclosure of confidential information, they are often referred to in the collective sense.
Both the EHRC and Acas guidance provide a useful overview on the law and best practice when using NDAs. Both warn against resorting to them on an automatic and routine basis, recommending employers instead ask themselves whether an NDA is in fact needed, whether it could cause serious moral or ethical issues and what the consequences of using an NDA might be.
The Acas guidance includes a section specifically on sexual harassment, which states that NDAs:
- should not be used to prevent the reporting of sexual harassment;
- cannot stop a worker reporting sexual harassment by making a ‘protected disclosure’ or ‘blowing the whistle’;
- cannot prevent someone from reporting an incident of sexual harassment to the police as a possible criminal act;
- cannot prevent an individual from disclosing future acts of sexual harassment; and
- cannot prevent a worker who has witnessed sexual harassment from giving evidence of what they have seen to a tribunal or court.
Other key and actionable points for employers are that NDAs should be drafted in clear and simple English, while anyone agreeing to be bound by an NDA should be given time to consider the implications of agreeing to the restriction, including having sufficient time and opportunity to obtain independent legal advice.
The Acas guidance recognises that there are legitimate reasons where both employers and employees would want to use an NDA to ensure both parties have a clean break. In doing so, it takes a more pragmatic view of NDAs than can sometimes be portrayed in the media.
Even in the post #MeToo era, it is hard to envisage circumstances where the use of NDAs will be completely abolished. At times, the reputational protection that they offer is just as valuable as the funds that would be spent defending a course of litigation. An employee may decide that signing an NDA is in their best interest, seeing it as a less stressful and intrusive alternative to a grievance or tribunal proceedings.
It is possible that regulation designed to ensure NDAs do not prevent proper recording of workplace sexual misconduct will follow. How this could be done is uncertain, although options that have been suggested within the BEIS consultation report include standard NDA wording and annexing written guidance for employees' attention, along with NDAs.
Any enforced standard wording brings with it the usual concerns that the accompanying rigidity will lead to problems with reaching a settlement and such wording will need constant new iterations to keep pace with legal developments. There is arguably greater merit to annexing written guidance to NDAs, which may encourage a clearer, well-explained agreement that does not go further than necessary.
The Acas guidance also recognises that, while an NDA is a useful tool, it is not an excuse for employers to brush any organisational problems under the carpet. NDAs should not be used to avoid the short-term pain of tackling and improving a workplace culture in which cases of sexual harassment occur. Employers should also be mindful that negative press around NDAs being used incorrectly or in an abusive manner is likely to hit their bottom line, as well as their ability to hire new talent – not least because the younger and post #MeToo generation of employees increasingly demand that their employer is aligned with their moral views.
Tom Fancett is an associate at Dentons