The topic of sexual harassment has been widely reported by the media, starting with the allegations against Harvey Weinstein in Hollywood and leading to the #metoo movement with individuals sharing their experiences of sexual harassment in the workplace. This has forced employers to look at how they deal with sexual harassment in the workplace. The use of non-disclosure agreements (“NDAs) and confidentiality clauses have recently been in the spotlight following their use by Harvey Weinstein and Sir Philip Green where it was reported that NDAs were unethically used to silence victims of sexual harassment and discrimination, thereby allowing the perpetrators to continue undeterred.

In November 2018, the Women and Equalities Committee launched an inquiry into sexual harassment in the workplace with findings that NDAs had been used unethically and recommendations were made to the UK government that NDAs should be better controlled and regulated. The government accepted some of these recommendations and has started a consultation to ensure workers are aware of their rights and to prevent the misuse of NDAs.

Should NDAs and confidentiality clauses still be used?

The government has recognised that NDAs are used by businesses for legitimate reasons and they play an important role in the employment context. In employment contracts, it is important to have confidentiality clauses as they protect an employer’s trade secrets and confidential information. Settlement agreements, agreements where an employee settles all claims it may have against an employer, is another area of employment law where confidentiality provisions are necessary. These confidentiality clauses may prevent both parties from disclosing information relating to the dispute and allow both parties to attempt a clean break from the other.

Government proposals

The main proposals which the government are consulting on are:

  • legislating to ensure that confidentiality provisions do not prevent any disclosure to the police – and to seek to stop an employee reporting a crime or discussing the matter with the police would be unenforceable;
  • summarising confidentiality provisions and limitations in employment contracts in the written statement of particulars issued at the start of the employment contract;
  • expanding the legal advice employees receive on settlement agreements for a legal settlement agreement to be valid - in addition to the advice an employee already receives from a legal advisor, the advice should cover the nature and limitations of any confidentiality clause in the settlement agreement and the disclosures that are permitted;
  • requiring confidentiality clauses to state which disclosures are not prohibited – this could include a protected whistleblowing disclosure, reporting a criminal offence or reporting to another regulatory body; and
  • enforcement – any non-compliant confidentiality clause would be void in its entirety. Therefore, an employee who breaches the confidentiality provisions in a settlement agreement could not be sued if the confidentiality provision was not drafted properly. If not drafted properly in an employment contract, this could leave the employer’s trade secrets exposed.

The government consultation ends on 29 April 2019.

Guidance for solicitors

The Solicitors Regulation Authority (“SRA”) issued a warning notice that solicitors should not draft NDAs or confidentiality clauses which prevent individuals from notifying the police or regulators about misconduct. The Law Society recently published guidance which explicitly sets out the disclosures which cannot be restricted. According to the guidance and warning notice, NDAs will be improperly used if the parties seek to:

  • use the NDA as a means of preventing or deterring a person from:
    • reporting misconduct to the police or a serious breach of regulatory requirements;
    • making a whistleblowing claim;
    • reporting an offence to a law enforcement agency;
    • co-operating with a criminal investigation;
  • use the NDA as a means of improperly threatening litigation against an individual; or
  • prevent someone who has entered into an NDA from keeping or receiving a copy.

What should employers do next?

Employers should keep an eye out for the outcome of the government consultation. In the meantime, businesses should review their confidentiality clauses and NDAs to ensure that they are do not prevent employees from disclosing or reporting to the police and check that they are not drafted too widely. If employees are being asked to sign such agreements, employers should take reasonable steps to ensure the employee fully understands what they are signing up to.