Consultation launched on misuse of confidentiality clauses

Background

Confidentiality clauses or non-disclosure agreements (“NDAs”) are currently a controversial topic, particularly where they are used to prevent employees from reporting allegations of sexual harassment or other similar misconduct. Although a confidentiality clause cannot prevent a worker from whistleblowing, the legal tests for a “protected disclosure” under whistleblowing legislation are quite complex and workers are often unaware of their rights.

There have been several recent interventions and proposals in this area:

• The WEC’s report on sexual harassment in the workplace called for NDAs to be better controlled and regulated, and condemned their use in sexual harassment cases where the effect is to prevent the victim from ever being able to talk about what has happened.
• The Equality and Human Rights Commission (“EHRC”) also produced a report on sexual harassment at work which recommended that any contractual clause preventing disclosure of future acts of discrimination or harassment should be void. The EHRC also proposed a statutory code of practice setting out the circumstances in which confidentiality clauses preventing disclosure of past acts of discrimination or harassment will be void.
• The Solicitors Regulation Authority has made it clear that NDAs should not be used to prevent anyone from notifying regulators or law enforcement agencies about reportable misconduct.

Against this background, the Government has now published a consultation paper on options for preventing the misuse of confidentiality clauses, particularly in situations of workplace harassment and discrimination. The consultation covers both general clauses in contracts of employment and specific clauses in settlement agreements.

The options under consultation

The Government has set out its preferred options for regulating the use of confidentiality clauses and framed its consultation questions around them:

• Examples of confidentiality clauses which have sought to cloud a worker’s right to make a protected disclosure, or overstretch the extent to which information in confidential. The Government is seeking information about this as it shares the WEC’s concerns that confidentiality clauses are being used to intimidate or silence victims of harassment or discrimination. Such clauses may suggest that the worker has no whistleblowing rights or cannot bring an Employment Tribunal (“ET”) claim; or they may be unreasonably expansive by preventing discussion with people such as the police, a doctor or a therapist.
• A clear exclusion from confidentiality clauses for all disclosures to the police, and whether disclosures to any other people or organisations should be excluded. The Government sees this as providing clarity for workers, meaning a matter could be reported to the police whether or not it meets the whistleblowing tests. But the proposals stop short of a wider ban on confidentiality clauses in settlement agreements covering harassment and discrimination. This is on the grounds that confidentiality may benefit the worker as well as the employer, and such a ban may make employers less likely to consider settlement.

  A requirement for all confidentiality clauses in settlement agreements, and written statements of employment particulars, to highlight clearly the disclosures that settlement agreements do not prohibit. This proposal is designed to prevent unethical drafting and ensure that workers understand their rights. The Government does not favour requiring a standard single form of words for this. It also recommends that the independent advice workers receive on settlement agreements should be specifically required to cover any confidentiality provisions.

• A confidentiality clause that does not meet the new wording requirements should be made void in its entirety. This would mean that workers who breach such confidentiality provisions could not be sued for breach of contract if the clause was not drafted appropriately. The Government has not gone so far as to propose making it an offence to include confidentiality clauses designed to prevent whistleblowing or disclosure of a criminal offence (as the WEC had recommended).

• Enforcement of information about confidentiality clauses within employment contracts through the right to a written statement of particulars. The existing requirement to give a written statement of employment particulars can already be enforced in the ET. The Government suggests that any new right to information in written particulars about the limits of confidentiality clauses can simply be enforced in the same way. It is questionable how effective this would be, as the current remedy for failure to provide written particulars is only two or four weeks’ pay.

 Implications

Although the consultation paper suggests some significant changes, the Government has stopped short of deciding to ban NDAs relating to harassment and discrimination altogether. 

Confidentiality provisions often benefit individual workers as well as the employer – they enable sensitive matters to be kept private by all involved, and facilitate settlement to the benefit of both parties. The Court of Appeal expressly relied on this point when granting an interim injunction which prevented the Telegraph from publishing details of allegations that were subject to settlement agreements containing NDAs.

It is worth noting that the proposals are not limited to disclosures about harassment and discrimination. The reforms would apply to all confidentiality clauses in both settlement agreements and employment contracts – including the proposal that the entire clause in a settlement agreement should be void and unenforceable if it does not include the required new wording. If standard wording is not specified for this, we may see attempts to avoid any type of confidentiality provision in a settlement agreement by arguing that the employer’s wording does not meet the requirements.

The consultation will be open until 29 April 2019.