The use of confidentiality clauses in employment law today

NDAs are under increased scrutiny because they deter victims of harassment and discrimination from speaking out. This follows the case of Harvey Weinstein’s PA, Zelda Perkins and other high-profile cases which have emerged in the wake of the Time’s Up and #MeToo movements. On 10 February 2022, Channel 4 received widespread press criticism for its use of gagging clauses in settlement agreements with female employees who had alleged gender pay discrimination, harassment, and bullying. Some commentators found it particularly ironic that a broadcaster who reports on these issues and is a proponent of free speech sought to prevent its own employees from speaking openly about such issues within its own workplace.

The Conservative MP Maria Miller and the Charity ‘Pregnant Then Screwed’ are campaigning for the use of NDAs to be dealt with in the Employment Bill in March 2022, and an online petition has been issued regarding this. Shockingly, but unsurprisingly, a survey by Pregnant Then Screwed found that nearly 90% of women who signed NDAs felt that they had no choice but to do so. Any undue pressure is unacceptable, even if it is industry standard practice for NDAs and confidentiality provisions to be used in settlement agreements.

The impact and limits of confidentiality provisions

In some cases, the use of such confidentiality provisions can adversely affect the employee’s mental health or further compound existing injury to their mental health which they have already suffered due to the discriminatory treatment to which they have been subjected. Such vulnerability should be borne in mind by HR and line managers when communicating with employees about the confidentiality provision in a settlement agreement.

Confidentiality should never be traded for a guaranteed reference, and an individual who has signed an NDA cannot be prevented from receiving a copy of the agreement (as happened in the Zelda Perkins case some years’ ago.)

Regulatory restrictions on NDA reach

Despite signing a settlement agreement, employees can still make a protected disclosure, i.e. they can whistle blow and settlement agreements cannot validly prevent this. There should also be carve outs included in confidentiality clauses for regulatory assistance, complying with legal obligations such as giving evidence in Court, and to report any criminal activities to the police.

FCA regulated entities have to make clear in their settlement agreements that nothing in the agreement prevents the employee from making a protected disclosure, i.e. whistleblowing and the settlement agreement or NDA must not contain warranties which require the employee to disclose to the firm if they have made a protected disclosure or warranting that they know of no information which could form the basis of a protected disclosure.

Where confidentiality clauses are unenforceable

ACAS guidance on NDAs provides that confidentiality clauses are unenforceable where they attempt to hide something that cannot legally be kept confidential. In fact, NDAs may be inappropriate or even unlawful where:

1. An issue impacts a number of workers, and the NDA could have a wider impact due to a lack of transparency.
2. An NDA is used as a matter of routine leading to a culture which lacks openness; or
3. An NDA is trying to hide an issue which makes it less likely that an employer will address underlying issues that could cause further problems.

Confidentiality clauses should not be used to cover up inappropriate behaviour or wrongdoing particularly where there is a risk of repetition of such behaviour; or to try to stop the reporting of discrimination, harassment or prevent whistleblowing.

Have NDAs been overused?

Rather than an employer’s starting point being to automatically include an NDA in a settlement agreement in all cases from the outset; they should instead consider whether a confidentiality provision is actually required in that specific case. Some employers believe that open disclosure of sexual harassment and discrimination issues and how they are dealt with is better for their reputation, employee relations and supports any zero-tolerance policy they may have.

For further information or advice related to this topic, please contact Michelle Chance below.

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