Clauses for concern? Non-disclosure comes under microscope in review

Craig Asbury reports on the thorny question of confidentiality agreements

The recent high profile sexual harassment cases in the media, and the growing momentum of the #Metoo movement, has prompted closer examination of how businesses are responding to such incidents in the workplace.

Confidentiality clauses – sometimes referred to as non-disclosure agreements or NDAS – have come under particular scrutiny. Routinely used in employment contracts and settlement agreements, the UK Government now wants to cut down on the unethical misuse of, or lack of transparency in, these clauses and has launched a public consultation with proposals to change their use.

This is based on a concern that employers may be misusing them to suggest to alleged victims of harass-

ment that they are bound to maintain total silence. This is despite the fact that such clauses cannot prevent certain disclosures, including protected disclosures, commonly referred to as ‘whistleblowing’.

So does this mean the end of confidentiality clauses altogether? No. The Government’s consultation recognises that they can be appropriate in contracts of employment, to protect trade secrets and other confidential information, and settlement agreements, where they typically prevent the employee – and often the employer – from disclosing information relating to the dispute.

This can benefit both parties by facilitating a clean break and encouraging settlement, particularly where there are disputed allegations made by both parties against the other. The

UK Government is proposing that confidentiality clauses in settlement agreements will be void unless they clearly state that they don’t prevent protected disclosures, the reporting of criminal offences, or discussing any matter with the police. The consultation asks whether this list should include other disclosures, and notes that the Government may issue guidance to encourage further best practice.

It is also proposing to extend the requirement that an individual must receive independent legal advice before signing a settlement agreement, so that individuals must also receive advice on any confidentiality provisions and their limitations.

Employment contracts would need to set out the same limits on confidentiality as settlement agreements,

via workers’ written statements of particulars. Failure to comply would not render the confidentiality provisions of the employment contract void; but workers would be able to raise the issue at a tribunal. They could seek a declaration or, if they raised it alongside another claim – for example discrimination – they could be entitled to extra compensation.

While the Law Society of Scotland has not issued guidance at this stage, the Law Society of England and Wales has; recommending that confidentiality clauses in settlement agreements should clarify that workers can still make certain disclosures.

Their suggested list of permitted disclosures, which is also incorporated into the settlement agreement template found on our online HR and employment law tool Workbox, goes somewhat further than the Government’s current proposals.

The public consultation on confidentiality clauses closes on 29 April; responses can be provided in the consultations section of the UK Government’s website. Craig Asbury is an employment solicitor in Brodies Workbox team.