NON-DISCLOSURE AGREEMENTS | Government cracks down


NON-DISCLOSURE AGREEMENTS | Government cracks down


Following the recent controversy surrounding Non-Disclosure Agreements (NDAs), the government has announced new measures to stop ‘gagging orders’ from silencing workers.

What is a Non-Disclosure Agreement?

A Non-Disclosure Agreement, also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA) or secrecy agreement (SA), is a legal contract between two or more parties that outlines certain information, material or knowledge that is to be treated as confidential, prohibiting it from being shared with anyone outside of the agreement.

How are NDAs potentially problematic?

While many businesses use NDAs and confidentiality clauses for legitimate reasons – to prevent the disclosure of confidential information – there is growing concern that a very small minority of employers are using NDAs to intimidate whistleblowers and cover up incidents of harassment and discrimination, including sexual assault, physical threats and racism.

Like all contracts, NDAs cannot be enforced if the contracted activities are against the law. In other words, employers cannot use NDAs as a means of preventing signees from reporting criminal wrongdoing to police.

The abuse of NDAs hit the headlines in October 2018, when it emerged that Topshop boss Sir Philip Green had used them to prevent at least five members of staff from speaking out against alleged sexual and racial harassment.

"We’re sending a clear message...to ensure workers are able to come forward, be aware of their rights and receive the advice they need before signing up to them.”
Prime Minister, Theresa May

What are the government proposing?

Following the introduction on from the government’s introduction of a new harassment code of practice, the government are looking to crack down on the unethical use of these non-disclosure agreements by tightening the rules.

These measures will include:

  • Clarifying in law that confidentiality clauses cannot prevent an individual from speaking to the police and reporting a crime (or prevent them from disclosing information in any criminal proceedings);
  • Requiring employers to provide a clear written description of a person’s rights before they sign any confidentiality clauses in their Contract of Employment or within a settlement agreement; and
  • Extending the law to ensure that those signing settlement agreements receive independent legal advice before doing so, including making them aware of the limits of any confidentiality clauses.

The plans form part of the government’s Industrial Strategy, which aims to create a fairer workplace. You can discover more about the industrial strategy here.

Comment

Speaking on the new proposals, Prime Minister Theresa May explained: “Sexual harassment is against the law and discrimination of any kind will not be tolerated – in the home, the workplace or in public.

Over the past couple of years, we have seen brave individuals breaking silence on such behaviour, but too many are still facing the unethical misuse of non-disclosure agreements by their employers.

We’re sending a clear message that a change in the law is needed to ensure workers are able to come forward, be aware of their rights and receive the advice they need before signing up to them.”

sexual harassment and NDAs

A word from our expert

James Tamm, Director of Legal Services at Ellis Whittam, comments “Whilst you can understand the government wanting to be seen to do something, the changes proposed are largely unnecessary, certainly in the context of settlement agreements, which is where most of this controversy has arisen from. Under current legislation, the right to make a protected disclosure – “blowing the whistle” – is unaffected by signing a settlement agreement. To that end, an employee can today complain of criminal wrongdoing to the police if they believe it has taken place without changing the current law. Most agreements I have seen from our team of Employment Law experts will state this specifically, and certainly any competent solicitor advising an employee would be aware of this in any event.”

Legitimate reasons

He continues: “The Government will need to make sure that whatever is proposed does not go too far. There are legitimate commercial reasons for both employers and employees to want to maintain confidentiality over the details of payments made under a settlement agreement. Anything that endangers that is likely to make settlement less attractive and increase the number of Employment Tribunal claims at a time when the tribunal system is already stretched to breaking point.”

Need a helping hand?

If you want to make sure that your non-disclosure agreements align with best practice, our qualified HR, Employment Law Advisers can ensure that you’re acting in accordance with the law whilst also keeping your commercial requirements in mind.

For a free consultation, call 0345 226 8393.

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