UK: Government Proposes To Tighten Use Of NDAs And Confidentiality Clauses

Non-disclosure agreements (NDAs) and confidentiality clauses have been under scrutiny recently, following the #MeToo movement. While many businesses legitimately use NDAs and confidentiality clauses to prevent disclosure of confidential business information, some employers are alleged to have sought to take advantage of these agreements and clauses and to be using them unethically in a manner intended to "silence victims".

There is increasing evidence that confidentiality clauses are being abused by a minority of employers to intimidate victims and to conceal harassment and discrimination in the workplace – including sexual assault, physical threats and racism.

However, not all use of NDAs and confidentiality clauses is necessarily inappropriate. The government does recognise that they have a "right and proper place in the employment context", in relation to both employment contracts and settlement agreements. 

It is common practice when an employee leaves their employment with an enhanced settlement (whether that be as a result of redundancy or misconduct) that the employer requires the employee to enter into an NDA or a settlement agreement. As part of this agreement, and usually as a condition of receiving the settlement payment, it is likely that the employee will be required to agree to maintain confidentiality as well as agreeing not to raise further grievances or legal claims against the employer. Such agreements are entirely normal, and can be used to protect the interests of both parties. 

However, there is concern that confidentiality clauses are being used in some cases to silence victims of harassment, bullying and discrimination. There have been recent examples of employees allegedly being paid large sums of money as an enticement to enter into NDAs to ensure that they remain silent about incidents that have taken place, including sexual harassment and race discrimination.  

In order to address this the government announced, on Monday 4 March, new legal proposals which would tighten the rules around the use of NDAs and confidentiality clauses. Business Minister Kelly Tolhurst stated that the new proposals will "help to tackle this problem by making it clear in law that victims cannot be prevented from speaking to the police or reporting a crime and clarifying their rights". The proposals include legislating that confidentiality clauses cannot be used to prevent employees from reporting harassment or discrimination to the police. 

There are already some limitations on confidentiality clauses. For example, they cannot remove an individual's statutory employment rights or override anti-discrimination law. They can also never remove a worker's right to "blow the whistle". Despite these limitations, confidentiality clauses can be drafted in a manner that many would see as unethical. There is some evidence that employers frame such clauses so widely that the terms suggest employees do not have such rights and cannot discuss the issue with anyone, including the police. The consultation seeks views on the limitations that might be put on confidentiality clauses and NDAs, and offers legislation to clarify what these provisions cannot cover.  

The government has also proposed to extend the law in relation to settlement agreements to require that an individual entering into such an agreement must receive independent legal advice which specifically covers the limits of the confidentiality clauses. The intention here is to prevent employees from being "duped into signing gagging clauses" which they were unaware of. In addition, the government proposes to require that settlement agreements meet certain wording requirements in relation to confidentiality. Any agreement that did not meet these requirements would be void in its entirety.

The government is looking for feedback on experience with confidentiality clauses, and views on the its proposals. Any employer who wishes to participate in the consultation should send their responses to ndaconsultation@beis.gov.uk by 29 April 2019.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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