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.

non disclosure agreements

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.”

UK universities come under fire for NDA pay-offs

Universities are in the spotlight following figures obtained by the BBC which reveal that they have spent close to £90 million on NDAs in the past two years.

In the article, a number of academics reveal how they were “harassed” out of their jobs and made to sign non-disclosure agreements after making complaints. In one case, a former music professor at the University of Liverpool said she felt like she was treated as a “burden” and “bullied out” of her 10-year job after being diagnosed with cancer. She subsequently made the decision to break her NDA in the hope that others who have been “through the same horrors” will realise they are “not alone” and will feel empowered to speak out.

Jane Hallas

Head of Education Team

Expert Comment

According to Jane Hallas, Head of our Education Team, victims choosing to break their silence is becoming more and more common.

Speaking to Personnel Today she explains: “Increasingly, staff who signed such agreements, in return for payment to waive their right to bring claims against their employer, are deciding to break the confidentiality (non-disclosure) terms of their agreements. Strictly speaking, this means they are in breach of contract, which entitles the university to sue them for the breach. Whether universities will decide to take such action is debateable, particularly as it may attract more widespread adverse publicity.”

Approach with Care

Commenting on the recent furore surrounding NDAs and the implications for education leaders, she explains: “For education clients, NDAs (or settlement agreements) have to be approached with care in any event. Quite often, unions will request a settlement agreement for their member facing allegations of capability or safeguarding to avoid their member being dismissed and being able to lead with an agreed reference. However, there are limitations on settlement agreements in these circumstances. Safeguarding allegations should always be dealt with and reported to the Local Authority Designated Officer and settlement agreements cannot be used to avoid this legal requirement. Similarly, the School Staffing (England) Regulations 2009 expressly provide that maintained schools or academies may receive capability information upon request in respect of a teacher who has been the subject of capability proceedings in the past two years. Settlement agreements should therefore make this clear.”

#Metoo

As always, expert education advice should be taken in respect of any such agreements. NDAs have been in the news a lot recently in light of #MeToo and the Government’s proposals to tighten their use. Whether this latest report increases the pressure to implement the proposals, we’ll have to wait and see.

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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