The government has opened a consultation on the misuse of confidentiality clauses in harassment and discrimination situations. The consultation includes several proposals for stronger regulation of confidentiality clauses, including a potential requirement that any employment contract or settlement agreement containing a confidentiality clause must spell out which disclosures are permitted.

Background

The consultation aims to address some of the concerns expressed by the House of Commons Women and Equalities Committee in their high-profile July 2018 report into sexual harassment in the workplace. The Committee called on the government to "clean up the use of NDAs" and pointed to several examples of misuse, including that of the NDA used in the Zelda Perkins case (the former assistant to Harvey Weinstein).

In December 2018, the government announced that it would consult on NDAs as part of a package of measures to tackle sexual harassment at work.

The consultation avoids the term NDA and instead uses the expression "confidentiality clause", which is intended to cover confidentiality provisions in both employment contracts and settlement agreements.

Proposals for consultation

The proposals/questions for consultation are as follows:

  • Confidentiality clauses will not have to be in a set, standardised form (as the Committee had recommended) so employers can still use their own drafting.
  • Disclosures to the police must be clearly excluded from all confidentiality clauses.
  • Other disclosures could also be permitted - the consultation asks specifically about other persons or organisations to whom disclosures should be allowed.
  • Confidentiality clauses could be required to state their limitations (e.g., that they do not prevent protected disclosures, disclosures to the police or to a court).
  • The limitations could be in a specific form of words.
  • For settlement agreements to be valid, the worker's independent legal advice must specifically cover the scope of any confidentiality clause.
  • A confidentiality clause in a settlement agreement that does not meet the new wording requirements will be void in its entirety.
  • Confidentiality clauses in employment contracts that do not meet the new wording requirements will not be void (as that could leave trade secrets exposed) but the breach will count as a failure to supply employment particulars under section 1 of the Employment Rights Act 1996 (although that currently only carries a sanction of two to four weeks' pay, and a worker cannot bring a standalone claim for this type of breach).

The consultation closes on 29 April 2019.

Comment

Confidentiality clauses in settlement agreements are already the subject of an SRA warning notice which emphasises the need to allow protected disclosures, reporting of malpractice to a regulator, reporting a criminal offence or co-operating with a criminal investigation. However, these latest proposals could result in a further toughening up of the requirements for settlement agreements, with (potentially) standard wording, stronger penalties and a new requirement for specific legal advice on the confidentiality provisions which could lead to more negotiation.

The proposals to regulate confidentiality clauses in employment contracts will, if brought into force, require many employers to change the wording of their standard employment contracts to make clear which disclosures are permitted, as many standard clauses do not do this.

The consultation also includes the comment that there is no reason for a confidentiality clause in an employment contract to cover discrimination and harassment at all. Although there are no concrete proposals to stop confidentiality clauses extending to discrimination and harassment (and the consultation observes that disclosures about discrimination or harassment might already be allowed by the whistleblowing legislation) there is a general question about what limits should be placed on confidentiality clauses in employment contracts. Although confidentiality clauses are not typically drafted with discrimination and harassment in mind, there may be situations when they could legitimately cover that type of information - for example the names of individuals under investigation for alleged discrimination. This is therefore a potential area to watch, although the consultation currently stops short of making any specific proposals to restrict confidentiality clauses at this stage.