NDAs preventing disclosures about crime to be banned

In the last days of Theresa May’s premiership (remember that?), the government published its response to consultation on misuse of confidentiality clauses which set out six new proposals to regulate the use and misuse of NDAs. The lack of any progress since then suggested that these reform ideas had been shelved indefinitely. In a surprise move on 28 March, the current government announced a “crackdown” on gagging orders to protect the ability of victims of crime to access support. What does this mean for the use of NDAs by employers?

What these proposals mean

The proposals mean that employers would not be able to use NDAs to prevent certain types of disclosures. The new law would ensure that “information related to criminal conduct” can be discussed with the following:

• The police or other bodies which investigate or prosecute crime.
• Qualified and regulated lawyers
• Other support services (such as counsellors, advocacy services, or medical professionals) which operate under clear confidentiality principles.

The announcement follows the recent campaign to raise awareness of the Victims’ Code, which aims to ensure that victims of crime know about the services and support that they are qualified to receive.

No express reference is made to the previous consultation, but the current proposal is essentially the same as one of those put forward in 2019 - legislating so that confidentiality clauses cannot prevent disclosures to the police, regulated health and care professionals and legal professionals. This was based on concerns about victims being made to feel unable to report sexual harassment to the police, and a reported an increase in mental health problems and isolation through not being able to talk to appropriate professionals. Although the current plans are limited to professionals operating under clear confidentiality principles, counsellors are listed as an example. This indicates the new rules are not intended to be limited to regulated professions, which was a suggested limitation in 2019.

We do not yet have any detail on what “information related to criminal conduct” means. Does it require an actual crime, or simply something that the individual suspects may be a crime? This could be an important issue, particularly in cases of sexual harassment where the victim may be unsure about whether an actual crime has been committed. Many of the more serious incidents of sexual harassment may well amount to a crime if they involve an assault. Other forms of harassment may be a hate crime if based on race, religion, disability, sexual orientation or transgender identity.

What these proposals don’t mean

These proposals are limited to reporting criminal conduct to certain professionals. They would not prevent NDAs which cover different topics, or allow such conduct to be discussed with others such as friends, journalists or prospective employers. The announcement expressly confirms that other NDAs including “provisions in respect of commercially sensitive information, financial agreements and any other obligations unrelated to the disclosures that we are permitting” will remain unaffected.

None of the other proposals made in 2019 are covered. As we wrote about at the time, these included legislation relating to the wording of confidentiality agreements, how they should be explained as part of a settlement agreement, and new enforcement measures.

This means that employers will be able to continue to use NDAs in most common situations where a potential crime is not involved. It is important to remember, however, that there is already other law and guidance on how NDAs should be used.

There is best practice guidance from the Equality and Human Rights Commission from 2019 and Acas guidance for employers from 2020, as well as a warning notice on NDAs from the Solicitors Regulation Authority which sets out the regulatory requirements for solicitors including in-house counsel. In higher education, there is legislation which specifically bans all NDAs related to sexual abuse, sexual harassment, sexual misconduct and other forms of bullying and harassment. Perhaps most importantly, whistleblowing laws mean that any NDA which attempts to prevent a protected disclosure is unenforceable. All employers regulated by the Financial Conduct Authority must include a term in any NDA making it clear that it does not prevent a protected disclosure.

What next?

This legislation will be introduced “as soon as Parliamentary time allows”, which means that we do not know when (if at all) the proposals will become law.

In the meantime, there continues to be considerable concern about potential abuse of NDAs, particularly in relation to employment. As discussed in our recent article for the Solicitors Journal, the Legal Services Board has just reported on a call for evidence on the misuse on NDAs. They found that a significant failing with the current system arises from inadequate legal advice to employees entering into a settlement agreement.

NDAs have a valid role to play. Employers certainly have a legitimate concerns that NDAs can help to address, for example about disgruntled employees exploiting reputational damage by circulating disputed or false allegations on social media or review sites. A complete ban on NDAs would seem to go too far. These new proposals do cover some of the issues flagged in our recent article, but limiting permitted disclosures to criminal conduct rather than wider wrongdoing seems only part of the solution to a bigger problem.

Employers who use NDAs need to be aware of the guidance on good practice as well as this proposed change to the law, and should watch for further developments.