Non-Disclosure Agreements or ‘NDAs’ have become something of a touchy subject in recent years owing to their increasingly frequent appearances in high-profile cover-ups and abuse scandals. In particular, NDAs are said to be widely used to cover up allegations of unlawful discrimination and sexual harassment in the workplace and have featured in a number of major news stories, not least those involving figures such as Sir Philip Green and Harvey Weinstein.
Settlement agreements also feature significantly in this area and are used to resolve workplace disputes without recourse to an Employment Tribunal. Settlement agreements can cover matters other than harassment and discrimination and may even be used in cases where an employee leaves without any trouble. They can also be used to impose obligations of confidentiality on both parties to a dispute, meaning that neither party can discuss the circumstances leading up to the agreement. Despite their obvious use as a legitimate tool for dispute resolution and for the protection of employers and employees alike, however, such agreements also fall prey to misuse.
In light of such issues, last month, Business Minister, Kelly Tohurst, announced plans for new legislation designed to stop NDAs from being misused in this way. The proposed reforms would:
- Require employers to clearly explain the limitations of confidentiality clauses in plain English, within settlement agreements and written statements from employees. This should ensure that individuals properly understand what they are signing and what their rights are.
- Build on existing legislation so that individuals signing NDAs get independent legal advice on the limitations of confidentiality clauses. This would include making it clear that information can still be disclosed to the police, legal professionals, and other regulated health and care professionals (e.g. doctors and social workers), irrespective of the NDA.
- Introduce new enforcement measures to deal with confidentiality clauses that do not comply with the law, such as voiding those not following the new legislative requirements.
Critics of the proposals have said that they do not go far enough. Employees entering into NDAs would not be permitted to disclose matters covered by the NDA to their friends and relatives, and detail relating to permitted disclosure to regulations such as the Financial Conduct Authority also appears to be lacking.
Implications for Employers
For many businesses, this should not make a significant amount of difference. When announcing the proposals in July 2019, Ms Tolhurst stated that:
“The vast majority of businesses comply with the law and use NDAs legitimately – from protecting commercially sensitive information to preventing information being shared with competitors.”
“We will not tolerate the use of NDAs to silence and intimidate victims from speaking out. The new legislation will stamp out misuse, tackle unacceptable workplace cultures, protect individuals, and create a level playing field for businesses that comply with the law.”
At present NDAs and confidentiality clauses are barred from preventing individuals from reporting wrongdoing in the public interest (also known as ‘whistleblowing’). Such disclosures could include a criminal offence, danger to health and safety, or failing to comply with legal obligations. NDAs and confidentiality clauses are also unable to prevent individuals from taking matters to an employment tribunal.
In the realm of employment, written confidentiality clauses are a common (and, indeed, perfectly normal and acceptable) feature in employment contracts. Not only that, but some employees actively prefer NDAs in the form of settlement agreements as, when used properly, they can alleviate the stresses of an acrimonious departure, legal action, and tribunals. Moreover, the courts have established that all employment contracts contain an implicit expectation of confidentiality with respect to information which has a necessary quality of confidence. This cannot, however, be used to cover up immoral or grossly unfair conduct.
The proposed reforms will not, therefore, have a negative impact on those businesses using NDAs and confidentiality clauses properly, and they will continue to have an important and valid role to play. It is nevertheless good practice to ensure that your documentation complies ahead of time, making sure that the boundaries of such provisions are clearly defined and clearly explained, and making sure that you do not attempt to prevent individuals from making disclosures that should be permissible.
What About Commercially Sensitive Information?
Not all NDAs are created equal. Indeed, many have very little to do with terms of employment. With so much talk in the media of new laws to clamp down on NDAs, however, it is easy to become concerned that all NDAs are being targeted.
It is important to understand that the proposed reforms are specifically targeted at those NDAs and confidentiality provisions that seek to supress evidence of wrongdoing in the workplace. NDAs which are rightfully used to protect commercially valuable information, for example, when sharing confidential information with another business for limited purposes in a joint project, should not be affected.
As is often the case in such matters, if you are using NDAs as the law and good practice dictate, there is no reason to believe that business will not simply continue as usual.
When Will the Reforms Take Effect?
At present, there is no parliamentary timetable for the new law, but we will update you as and when more precise information becomes available. In the meantime, your comments are, as ever, welcome.
Do you use NDAs in your business? Do you include confidentiality provisions in employment contracts? How do you limit the scope of such provisions to balance the fair and lawful treatment of your employees with the protection of your commercially sensitive information?