In an unexpected development, the latest set of amendments to the Employment Rights Bill added a whole new section on non-disclosure agreements (NDAs), which bans NDAs relating to harassment or discrimination. Is this a bad move for both employers and employees?
With some fanfare, the Government has announced a "Ban on controversial NDAs silencing abuse". Employment Rights Minister Justin Madders said, "The misuse of NDAs to silence victims of harassment or discrimination is an appalling practice that this government has been determined to end...these amendments will give millions of workers confidence that inappropriate behaviour in the workplace will be dealt with, not hidden, allowing them to get on with building a prosperous and successful career." In this article, we refer to employees, though strictly the amendment refers to the wider category of "workers".
A key problem with this proposal is that, if one takes the announcement at face value (though see below at "But...does the Government really mean what it says?"), the change would be bad news for employees, it would be bad news for employers and it would be likely to lead to delays and more pressure on already over-stretched Employment Tribunals.
So why is this such a problem?
What's proposed?
The proposal is that any term in a contract banning an employee from making allegations or disclosing information relating to harassment or discrimination will be void. Although it applies to any contract, including an ordinary contract of employment, in practice it is primarily directed at settlement agreements. The ban relates not only to sexual harassment but to any alleged discriminatory conduct. So, an allegation by an employee that they have not been promoted or have been marginalised at work because of a disability or their race (or any other protected characteristic) would be covered.
Will the proposals work?
Allegations of discrimination and harassment arise in many different contexts. The pressures on and motivations of the relevant actors (employees – both alleged victim and alleged perpetrator – and employers) will be context specific. But, although some employees relish the prospect of their "day (or more likely week) in court", in general experience suggests that:
- The making of an allegation gives an employee a degree of leverage in reaching a deal. Many (and maybe most) employees prefer to resolve matters on the basis that they receive a payment of compensation without the stress, cost, and potential publicity of a tribunal hearing. And, in any case, it is not safe to assume that all will have the courage and emotional and financial resources to follow a claim through to the end; absent a deal, some will give up.
- Employers (and any individual who is alleged to have harassed or discriminated) are generally keen to avoid the business disruption, costs and time spent in defending a claim – and, of course, potential damage to their reputations.
In addition, in many cases, facts and motivations may be complicated and contested. Although claims of sexual harassment generally depend on establishing who did what, claims that, say, someone was not promoted or was marginalised because of a protected characteristic, frequently involve an in depth exploration of decisions and actions over what may be an extended period. And the upshot may be nuanced or not particularly clear.
For reasons of this sort, reaching a deal frequently suits all concerned. As mentioned above, the making of an allegation gives an employee leverage; the proposed legislation strips out that leverage and, in effect, demonetizes the employee. Would an employer be willing to reach an agreement if, the following day, the employee could tell colleagues that they have been paid off by their employer or say the same thing on social media or to the press? Employers may take a "wait and see" approach, avoid reaching an agreement, and see if the employee has the resilience to follow a claim through - perhaps taking a chance on the outcome of a tribunal hearing.
It is likely that this will have an impact on tribunals too. Discrimination claims tend to be longer than most employment disputes. Many are scheduled for as long as one or two weeks and sometimes longer. If claims don't settle there will be more delays which will have an impact on all tribunal users.
From a policy perspective, there's a further problem. Justin Madders implies that some employers may use NDAs to hide what took place and avoid taking action. Although that is undoubtedly true in some cases, many employers will want to proactively respond to discrimination, take action against whoever was responsible and improve procedures for the future. They are likely to have a concern that taking such action before a claim is resolved may be seen as an acknowledgement of responsibility and strengthen the aggrieved employee's claim. So, the legislation may have the effect of delaying measures to improve things.
But...does the Government really mean what it says?
One qualification to what is said above is that there is a provision in the draft amendments relating to "excepted agreements". Although it is not clear what the Government has in mind, it might be used to create an exception to the general ban on NDAs. Under somewhat similar legislation banning NDAs in Ireland, there are provisions for so-called "excepted NDAs". These disapply the Irish ban if certain conditions are met. The most relevant is that before entering the agreement the employee has received independent legal advice in writing at the cost of the employer. If an agreement is entered, there is then a 14 day cooling off period during which the employee can withdraw without penalty.
If the Government were to follow a path along the lines of the Irish by creating a carve out for settlement agreements entered with legal advice, it would meet most of the criticisms made in this article. But we would be largely back to where we are now! In any case, the government has given no indication that it intends to create such a significant exception.
As discussed in our article on the latest amendments to the Employment Rights Bill, some types of claim (third party harassment, failure to make reasonable adjustments and victimisation) seem not to be covered by the ban. The late decision to add this to the Bill means that the Government hasn't consulted on this proposal and it's not clear to what extent it has thought these things through. We will no doubt find out in due course.
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