Last week we issued an alert about the UK government’s plans to introduce new legislation to tackle alleged misuse of confidentiality clauses in employment contracts and settlement agreements. The consultation has been launched primarily in response to concerns that some employers are using confidentiality clauses (sometimes referred to as “non-disclosure agreements”) to “gag” victims of workplace harassment or discrimination, in particular via settlement agreements. You may recall that last year the Women and Equalities Select Committee raised concerns about this in its inquiry into sexual harassment in the workplace.

The consultation asks:

  • Whether there should be more limitations on confidentiality clauses in the employment context to make it easier for workers and their advisers to understand when they are permitted in law to make a disclosure to the police or other people despite the existence of a confidentiality clause;
  • How to ensure workers are clear about the rights they retain when they sign a confidentiality clause or start work for a new employer; and
  • How to enforce any new regulations on confidentiality clauses.

We will of course keep you updated on the outcome of the consultation and what, if any, changes must be made to your template settlement agreements to ensure that any confidentiality clauses remain valid. To be clear, there is no suggestion that confidentiality clauses/non-disclosure provisions are going to be outlawed. The government recognises in the consultation document that such provisions have benefits for employees and employers alike by allowing the parties to draw a line under a dispute without fearing that the details will become public at a later stage. The tone of the consultation document, however, suggests that legislative changes will be introduced to place some additional limitations on confidentiality clauses, to reduce the scope for their being misused and to clarify what they can and cannot cover. The document is somewhat light on what actually constitutes the “misuse” it is seeking to prevent. It accepts the principle that the employer can “buy silence”, though obviously only if the employee agrees the price. It is left with misuse as circumstances where the employer purports to prevent (or threatens to sue upon) disclosures to the Police or relevant regulatory authority bodies for the industry in question.

In the meantime, it would be prudent for employers to review their existing template settlement agreements to ensure they comply with current best practice when it comes to “non-disclosure” provisions. Last year, for example, the Solicitors Regulation Authority (the regulatory body for law professionals) issued a warning notice about the inappropriate use of non-disclosure agreements. It made it clear that nothing in a settlement agreement should give the impression that an individual is prevented from:

  • making a protected disclosure under the whistleblowing provisions;
  • reporting misconduct to a relevant regulatory body;
  • reporting an offence to a law enforcement agency (e.g. the police); and/or
  • cooperating with a criminal investigation or prosecution.

It said that “it may be appropriate for the [non-disclosure agreement] itself to be clear about what disclosures are not prohibited by [it].” In January 2019, the Law Society issued guidance to the same effect. Also bear in mind these provisions when drafting any COT3 wording – it is not just a settlement agreement question.

Furthermore, if you are in a regulated sector, you should ensure your agreements comply with the requirements of your regulator. For example, employers in the financial sector must include wording in settlement agreements that makes it clear that the agreement does not prevent workers from making protected disclosures. They must also not include any warranty under which workers are asked to confirm that they have not made a protected disclosure and that they do not know of any information which could be the subject of a protected disclosure.