New guidance on use of confidentiality agreements in discrimination cases

Background

Confidentiality clauses or non-disclosure agreements (“NDAs”) have become a topic of significant interest because of how they can be used to prevent employees from reporting allegations of sexual harassment or other similar misconduct.

The Government recently published its response to a consultation on the regulation of confidentiality clauses, which sets out a number of proposals for new legislation in this area. This consultation had taken place against the background of various other interventions and proposals in this area. These included an EHRC report on sexual harassment at work and a Women and Equalities Committee report on sexual harassment in the workplace, which called for NDAs to be better controlled and regulated. (In addition, the EHRC is expected to publish wider guidance on tackling sexual harassment later this year.)

The EHRC’s guidance

The new guidance from the EHRC provides a significant steer on both the current law and good practice for both employers and workers. The introduction makes clear that it is concerned only with confidentiality agreements that could prevent a worker from speaking about any act of discrimination, harassment or victimisation which contravenes the Equality Act.

Confidentiality agreements in terms and conditions of employment. The guidance recognises that employers can legitimately seek to stop a worker discussing or using confidential information outside of work, either during their employment or after their employment has ended. There are, however, legal limits on this. The good practice guidance is as follows:

• Make it clear from the wording what the worker can or cannot do, and that the agreement does not stop them from speaking about any form of discrimination. The guidance suggests an employer should include a definition of what it considers to be confidential information, and its policies should make clear how workers can report discrimination and that reports will be taken seriously
• Do not put workers under pressure to sign a confidentiality agreement. Allow them time to consider it and discuss it with an adviser
• Give the worker a copy of the signed confidentiality agreement to keep for their records

Resolving disputes with workers. Confidentiality agreements which stop workers discussing acts of discrimination are commonly included in settlement agreements and Acas-conciliated agreements. In some cases this will not be lawful, but in any event the EHRC’s good practice guidance is:

• Consider the need for a confidentiality agreement on a case-by-case basis, and do not include it as standard in a template settlement agreement. Confidentiality agreements will not be necessary or appropriate “in most cases”. Examples of when they may be needed include: where the worker wants to use one; where a victim or witness wants one; in rare cases where a worker has falsely accused someone of discrimination; or where the employer has a legitimate interest such as maintaining confidentiality during an investigation
• In every case, weigh up: whether there is a clear reason for needing the agreement; the benefit to the employer; the impact on the worker and the culture of the organisation; and the benefit of not using one
• Word agreements so that they deal with the particular circumstances of the case and the employer’s main concern – for example, by preventing disclosure of how much compensation was paid rather preventing all discussion about the discrimination
• Inform the worker why a confidentiality clause needs to be used, so they can consider with their independent adviser whether this is reasonable
• Ensure the wording allows the worker to have discussions with specific people and organisations – including regulators, police, professionals bound by duties of confidentiality, immediate family, trade unions, and future employers (to the extent necessary to discuss how previous employment ended)
• Obligations should normally be two-way, so that if a worker is required not to discuss a specific issue the same will apply to the employer
• Give the worker a reasonable period of time to seek independent advice - normally at least ten days - and pay a sufficient costs contribution to allow them to both obtain advice on the agreement and seek changes if necessary. The employer should also seek legal advice, but not delegate all responsibility for drafting and negotiation to its lawyers
• Employers should monitor the use of confidentiality agreements, with larger employers or those who use a significant number of them keeping a central record to help monitor potential systemic discrimination issues. Their use should be signed off by a director or an appropriate delegated senior manager and, where reasonably possible, by someone who was not involved in the act of discrimination or in hearing any grievance related to it

Unlawful confidentiality agreements. The guidance also covers the types of confidentiality agreements which cannot be enforced. These include those which prevent protected disclosures under whistleblowing laws, discussion of criminal activity, or activities required by law such as giving evidence or making a report to a regulator. Good practice guidance says it should be clear to the worker from the wording of the settlement agreement that it will not stop them from doing these things.

Implications

It is surprising that the EHRC has chosen to publish this guidance now, as we are currently awaiting draft legislation to implement the Government’s recent proposals. The guidance only covers the current law, so will be out of date as soon as any new laws are published on matters such as to whom disclosures can be made and what wording must be included in confidentiality clauses.

This document is nonetheless likely to have a significant effect on discussions between employers and workers about confidentiality agreements, particularly as part of a settlement agreement. Much of the EHRC’s good practice guidance goes further than the law requires, but can still be used in negotiations between the parties.   

Overall, the guidance takes the approach that use of NDAs when resolving disputes should be the exception rather than the norm, with workers being given both time and money to consider whether they are willing to agree. This is quite a shift from the current practice of many employers, who present settlement agreements with a standard, template confidentiality clause, often required them be signed within a short timeframe, and make a minimal contribution towards legal fees.

The good practice guidance is not legally binding, but will undoubtedly be used by workers and their advisers to question the use of broad confidentiality clauses in agreements that settle discrimination claims. It remains to be seen how this will intersect with any forthcoming legislation.