UK Inquiry Launched to Review Use of Nondisclosure Agreements in Harassment and Discrimination Cases

As the #MeToo movement continues at pace, the Women and Equalities Committee of the UK Parliament (the Committee) has launched a new inquiry into the wider use of nondisclosure agreements (NDAs) in harassment and discrimination cases following its recent inquiry into sexual harassment in the workplace.

Background

In a recent Court of Appeal decision, the court granted an injunction against a UK newspaper, preventing it from disclosing allegations of “discreditable conduct” by a senior executive of a group of companies against five of its employees. In this case, the relevant complaints were settled by way of settlement agreements including NDAs. The individuals received independent legal advice and significant payments in exchange for signing up to the settlement agreements. Although the NDAs required the individuals to keep the alleged misconduct confidential, it did not prevent them from making any legitimate disclosures (i.e., blowing the whistle), including reporting any criminal offences. This is in accordance with Section 43J of the Employment Rights Act 1996, under which any provision seeking to preclude an individual from making a “protected disclosure” will be void. The individual has now been named in Parliament, and the case has given rise to wider questions over the use of NDAs to settle disputes relating to allegations of sexual misconduct in the workplace. This comes against a backdrop of a number of examples of alleged misuse of NDAs, which have been claimed to silence victims inappropriately.

Recent Recommendations

The Committee conducted a six-month inquiry into sexual harassment in the workplace, which they described in their report as “widespread and commonplace”. In July 2018, the Committee published a report which recommended that sexual harassment is put at the top of the UK government’s agenda, and suggested that the use of NDAs should be controlled to ensure that they are not used unethically in cases where sexual harassment is alleged. Specifically, the Committee recommended the following:

• The UK government should introduce legislation to require the use of standard, approved confidentiality clauses. These should include clear, plain English wording setting out the meaning, effect, and limits of confidentiality clauses, including a clear explanation of what disclosures are protected under whistleblowing laws and what disclosures cannot be prohibited or restricted
• The definition of protected disclosures and prescribed persons under whistleblowing legislation should be widened to include disclosures of sexual harassment to the police and all regulators, including the Equality and Human Rights Commission and Health and Safety Executive, and to any court or tribunal
• The UK government should make it an offence for an employer or their professional adviser to propose a confidentiality clause designed or intended to prevent or limit the making of a protected disclosure or disclosure of a criminal offence
• The use of provisions in confidentiality agreements that can reasonably be regarded as potentially unenforceable should be clearly understood to be a professional disciplinary offence

The UK’s Solicitors Regulation Authority (the SRA) has also addressed the use of NDAs in their Warning Notice on the use of NDAs, issued on 12 March 2018. Specifically, the SRA has advised that NDAs should not be used

• as a means of preventing, or seeking to impede or deter, a person from reporting misconduct, an offence to a law enforcement agency; co-operating with a criminal investigation or prosecution; or making a protected disclosure under the Public Interest Disclosure Act 1998;
• to influence the substance of such a report, disclosure, or cooperation;
• as a means of improperly threatening litigation against, or otherwise seeking improperly to influence, an individual in order to prevent or deter or influence a proper disclosure; or
• to prevent someone who has entered into an NDA from keeping or receiving a copy.

Scope of the New Women & Equalities Committee Inquiry

The new Women & Equalities Committee inquiry will focus on the wider use of NDAs in cases involving other forms of harassment or discrimination, and specifically on the following key issues:

• Whether there are specific types of harassment or discrimination for which NDAs are more likely to be used, and whether the use of NDAs should be banned or restricted in harassment and discrimination cases
• The safeguards that are required to prevent the misuse of NDAs
• The role of internal grievance procedures, and the specific obligations on employers to ensure that these are fair and thorough
• The accessibility for employees and employers to access good quality legal advice on NDAs and the ways to ensure that the quality and independence of legal advice for employees’ negotiating settlement agreements can be assured when advice is paid for by the employer
• Whether NDAs are being used repeatedly by employers to deal with cases involving a single harasser. If so, whether appropriate action is being taken to deal with the harasser’s behaviours
• Whether boards and directors should be involved in an employer’s decision to utilise NDAs

Settlement agreements are a useful tool for both employers and employees to bring disputes to a definite end, quickly and confidentially, with the benefit of independent legal advice. In light of the recent recommendations, employers should take care when drafting NDAs to ensure that they are not used to cover up illegal behaviour, or to prevent the reporting of conduct to the relevant authorities.  Although the recent Court of Appeal decision related to NDAs in settlement agreements, employers should be mindful that the recommendations apply to any NDA, including an NDA within an employment agreement. Employers should consider the recommendations at the beginning of an employment relationship, especially given that incoming employees will not typically be required to receive independent legal advice.

The call for evidence closed on 28 November 2018, and we anticipate recommendations to be published in the coming months. We will report on the findings of the Committee’s inquiry in due course.

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
Matthew Howse
Louise Skinner