Crackdown on abuse of non-disclosure agreements

The government is planning to introduce tougher rules to tackle abuse of non-disclosure agreements (NDAs) and confidentiality clauses in the workplace

Organisations are increasingly using confidentiality clauses to silence employees, including using them to cover up sexual harassment, racial discrimination and assault, and the government’s decision to tighten the framework on NDAs is a direct response to recommendations set out by the Women and Equalities Committee (WESC).

NDAs are used by businesses for a number of legitimate reasons but in a minority of cases they are being abused and those that sign them not made aware of their rights.

The new legislation will prohibit NDAs being used to prevent individuals from disclosing information to the police, regulated health and care professionals, or legal professionals, such as a doctor, lawyer, or social worker.

The updated legislation will also:

  • ensure employers make clear the limitations of a confidentiality clause, in plain English, within a settlement agreement and in a written statement for an employee, so individuals signing them fully understand what they are signing and their rights;
  • extend current legislation so that individuals signing NDAs will get independent legal advice on the limitations of a confidentiality clause – including making clear that information can still be disclosed to police, regulated health and care professionals, or legal professionals regardless of an NDA; and
  • introduce new enforcement measures to deal with confidentiality clauses that do not comply with legal requirements - for example, an NDA in a settlement agreement that does not follow new legislative requirements will be legally void.

Kate Palmer, associate director of advisory at Peninsula said: ‘These developments are certainly a leap forward in tackling NDA misuse. They will make it more difficult for employers to prevent employees from coming forward about certain workplace issues, such as harassment, following the signing of an NDA.

‘That said, whilst guidance on how confidentiality clauses should now be constructed is forthcoming, the government has refused to introduce a requirement to include specific wording within them.

‘Employers will still have a degree of control over how these clauses are constructed and yet more changes to the law may be necessary before the issue of NDA misuse is stamped out completely.’

For confidentiality clauses which form part of a settlement agreement, the government will legislate to require the NDAs to clearly set out their limitations. In the case of agreements signed at the beginning of an employment relationship, there will be legislation to require the limitations of the confidentiality clause to be included as part of a written statement of particulars.

The government will work with relevant stakeholders including the Solicitors Regulation Authority (SRA), the Equality and Human Rights Commission (EHRC) and the Advisory, Conciliation and Arbitration Service (ACAS) to produce suitable guidance for solicitors and legal professionals responsible for drafting settlement agreements.

Boards already have a responsibility, set out in the UK Corporate Governance Code and the Wates Corporate Governance Principles for Large Private Companies to establish a company’s purpose, values and strategy in line with the Code.

Directors have a legal duty under section 172 of the Companies Act 2006 to take into account ‘the interests of the company’s employees’ and ‘the desirability of the company maintaining a reputation for high standards of business conduct’

Business minister Kelly Tolhurst said: ‘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.

‘As we have seen recently, there are a handful of employers using NDAs to cover-up criminal acts in the workplace, including sexual harassment, assault and racist discrimination.

‘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.’

The reforms to NDAs form part of a wider response to sexual harassment in the workplace and are part of the government’s Good Work Plan, first announced in December 2018.

Legislation will be introduced when parliamentary time is available.

Confidentiality clauses – government response to the consultation

Sara White | 28-07-2019

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