What’s an NDA? Government consultation launched

So-called NDAs continue to hit the headlines in the wake of #metoo and allegations about possible misuse of confidentiality clauses in high profile harassment cases.

Such concerns have prompted the government to issue a consultation on measures to control the use of confidentiality clauses in situations of workplace harassment or discrimination. An inquiry by the Women and Equalities Select Committee into sexual harassment in the workplace, as well as the committee’s ongoing inquiry into the use of non-disclosure agreements in discrimination cases, has led the committee to conclude that some employers, including members of the legal profession, were using confidentiality clauses to silence victims of sexual harassment. It has also concluded that there is insufficient oversight and regulation of their use.

The government has now agreed that confidentiality clauses require better regulation. The consultation seeks a better picture of how confidentiality clauses work in practice and will review the legal framework around them. The stated intention is that it will then assess what changes are required to ensure that individuals signing such agreements are appropriately protected from misuse.

Although the term ‘NDA’ is the one that grabs the headlines, this isn’t a term we’re necessarily used to seeing in the UK employment context. For HR and employment law practitioners, more familiar terms are ‘confidentiality clauses’ in employment contracts and those you might more commonly expect to find in settlement agreements. We’ll look briefly at the differences, the interplay of these and the angles the consultation is focusing on.

Confidentiality clauses in employment contracts

Rather than rely on the implied duty of confidentiality which exists between employer and employee, prudent employers also expressly set out the information considered to be confidential in in their employment contracts. They may go on to state that its disclosure is forbidden and that the employer will be entitled to seek damages or injunctive relief if the employee discloses it. Given the fundamental importance of certain types of confidential information to businesses, it is reasonable for employers to go to great lengths to protect it. There is understandable concern about the impact of any steps to curtail an employer’s ability to protect confidential information. While the government recognises that deeming any confidentiality clauses in employment contracts void in their entirety could unfairly prejudice employers taking reasonable steps to safeguard trade secrets, it proposes to require the limits of any confidentiality provisions to be clearly set out. The consultation goes on to state that there is no reason why a confidentiality provision should be used in an employment contract to protect information concerning harassment or discrimination.

Confidentiality clauses in settlement agreements

Confidentiality provisions are very often a key element of settlement agreements and, given that significant issues and sums of money are frequently at stake, an expectation that the circumstances of termination and the details of settlement remain confidential have long been regarded as fairly standard fare in such agreements. The government acknowledges the risk that, without confidentiality provisions, employers may be less likely to consider settlement. The government is not, therefore, proposing to prevent the use of confidentiality clauses but to provide exclusions in their use. In particular, the government is seeking views on whether disclosures to the police and other categories of people or organisations should be specifically excluded.

As a more general point, the Women and Equalities Select Committee raised concerns about individuals’ ability to understand the confidentiality clauses by which they are agreeing to be bound. It has recommended the use of standard, approved clauses for both employment contracts and settlement agreements. The consultation is seeking views on whether standard, approved clauses may be effective, although the government expresses concern that the wording of the approved clauses could become out of date as protections develop over time. Our view is that approved clauses would certainly be unworkable and potentially fetter employers’ ability to put in place the specific protections needed for their businesses. What does make sense is the government’s proposal that the independent legal advice, which statute already requires to be given to the employee, should include advice about the nature and limitations of any confidentiality clause and any disclosures that the individual is still permitted to make.

There is, of course, a great deal of political momentum against wide confidentiality clauses and the effect that they have, or are perceived to have, on victims of harassment and their ability to speak up. Although it is likely to be some time before we see any changes brought in as a result of the current consultation, it is very likely that at least some of these proposals will be adopted in future legislation.

The consultation can be found here, and the closing date for responding is 29 April 2019.

Please get in touch if you would like to discuss any issues.