LawFlash

UK Government Responds to Proposals to Prevent Misuse of NDAs in Harassment and Discrimination Cases

July 30, 2019

The UK government has published its response to its proposals to prevent the misuse of nondisclosure agreements and confidentiality clauses in situations of workplace harassment or discrimination. While the UK government has not yet regulated in this area, it confirms its plans to implement changes in a number of key areas.

The Women and Equalities Select Committee of the UK Parliament (Committee) launched an inquiry into sexual harassment in the workplace in 2018, and subsequently launched an inquiry into the wider use of nondisclosure agreements (NDAs) and confidentiality clauses in harassment and discrimination cases. The Committee published its report on the use of NDAs in discrimination cases on June 11, 2019.

In light of recommendations by the Committee and the Solicitors Regulation Authority (SRA) (see UK Inquiry Launched to Review Use of Nondisclosure Agreements in Harassment and Discrimination Cases), the UK government launched an inquiry on March 4, with a number of key proposals for legal measures to ensure that workers are aware of their rights and to prevent the unethical use of NDAs and confidentiality agreements (see UK Proposes to Tighten Rules on Nondisclosure Agreements and Confidentiality Clauses).

In its response to these proposals, the UK government has demonstrated its commitment to ensuring that NDAs and confidentiality clauses are not used unethically to intimidate whistleblowers or to prevent individuals from reporting criminal conduct to the police.

With that said, the UK government emphasizes in its response that confidentiality clauses have a legitimate place in the employment context and that they are not misused in all scenarios. The UK government has acknowledged that confidentiality agreements can be used in two principle ways, at different stages of an employment relationship: as part of an employment contract (for example, to protect commercially sensitive information), and within a settlement agreement (to allow both sides of an employment dispute to move on with a clean break).

The government’s proposals and responses to the proposals are as follows.

1. Legal limitations

Proposal: To legislate so that no provision in an employment contract or settlement agreement can prevent someone from making any kind of disclosure to the police.

Response: The UK government believes that individuals should not be prevented from taking necessary steps to report a suspected crime, and intends to legislate to ensure that no provision in any employment contract or settlement agreement can prevent someone from making any kind of disclosure to the police, regulated health and care or legal professionals.

2. Ensuring the limits of confidentiality clauses are clear to the worker

Proposal: To require that a clear, written description of individual rights and limitations of the confidentiality clause be provided to a worker before he/she signs the confidentiality clause.

Response: The UK government agrees that it is important that workers understand the rights they maintain when signing a confidentiality clause, so they are not given the impression that they cannot disclose information to the police about harassment, discrimination, or other crimes. The UK government intends to legislate to require that confidentiality clauses clearly set out their limitations when included within employment agreements and settlement agreements. 

3. Wording for all confidentiality clauses

Proposal: To set a specific form of words to be used when drafting a confidentiality clause.

Response: The UK government intends to legislate to ensure that wording is clear and specific, but will not legislate to introduce a specific standard form of wording. The UK government agrees with the legal profession’s and employers’ standpoint in the responses to the consultation that specific wording would not cover all uses of confidentiality clauses and would not allow necessary flexibility. The UK government intends to work with the SRA, the Equality and Human Rights Commission (EHRC), and the Advisory Conciliation and Arbitration Service (ACAS) to produce suitable guidance for solicitors and other legal professionals responsible for drafting settlement agreements. 

4. Advice on settlement agreements

Proposal: That the independent legal advice a worker receives when signing a confidentiality clause should cover the nature and limitations of any confidentiality clauses in order for the settlement agreement to be valid.

Response: The UK government proposes to extend the legislation to ensure that individuals receive advice not only on the nature of the confidentiality requirement but also on the limitations of confidentiality clauses in general. The SRA has also committed to updating its guidance on the use of confidentiality clauses.

5. Enforcement

Proposal: To use two enforcement mechanisms for the misuse of confidentiality clauses, which are primarily used in two different contexts: settlement agreements and employment contracts. The UK government proposed that confidentiality clauses in settlement agreements that do not follow new legislative requirements should be made void in their entirety, without voiding the whole settlement agreement. In the case of employment contracts, a requirement to be clear on the limits of any confidentiality clause should be included in the written statement of particulars that must be given to all employees.

Response: The UK government will legislate to introduce new enforcement measures for confidentiality clauses that do not comply with legal requirements. A worker will be able to bring a claim in an employment tribunal if a confidentiality clause in a settlement agreement does not meet the new drafting requirements. The UK government intends to legislate to introduce a requirement to be clear on the limits of any confidentiality clause in an employment agreement. A worker that receives a confidentiality clause in an employment agreement that does not meet this requirement will be entitled to receive additional compensation in an employment tribunal award, if he/she is successful in the claim.

6. Monitoring and Reporting

Proposal: Respondents to the consultation recommended the introduction of a monitoring mechanism to record each instance of an employer and employee entering into a settlement agreement containing a confidentiality clause, in order to prevent employers from repeatedly covering up allegations of sexual harassment or discrimination.

Response: The UK government’s view is that simply knowing the number of confidentiality clauses used by a company is not in itself very meaningful, and requiring all confidentiality clauses to be submitted for scrutiny is likely to be overly burdensome and impractical. The UK government is welcoming suggestions on alternate interventions to prevent and better monitor cases of sexual harassment and discrimination to help build on the Corporate Governance Code. That said, the UK government is conscious not to jeopardize the use of confidentiality clauses in circumstances where individuals want to move on with their lives following unfortunate circumstances.

Further Proposals 

The Government Equalities Office has also recently launched a consultation on sexual harassment in the workplace more generally, including whether there should be a mandatory duty to prevent workers from harassment in the workplace. The consultation will look at whether the current laws on this issue provide the intended protections, whether there are any gaps in the law, and what else can be done at a more practical level to ensure people are properly protected at work. We will report on the responses to this consultation when they are published.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

London
Louise Skinner
Sarah Stock