Non-disclosure agreements in employment disputes

You may have seen the media expressing its outrage at the fact that employees who were settling disputes and getting paid settlements from their employers were being required to sign ”non-disclosure agreements”. The impression given by the media was that there was something underhand in this, and that these “NDAs” were being used to silence victims of sexual harassment.

I have been drafting Settlement Agreements (or Compromise Agreements) on behalf of employers, and advising employees on the terms and effect of them, since they were first introduced in 1992. I honestly cannot recall ever seeing a Settlement Agreement without a provision requiring the parties to keep the terms of the settlement confidential. The same applies to virtually every settlement of an employment dispute through the services of ACAS. So are these so called non-disclosure provisions necessary or desirable?

The disadvantage, at least from an employee’s perspective, is that the confidentiality provision will prevent them publicising inappropriate behaviour by employers or colleagues. That said, often the allegations against the employer or a colleague are just that – they have never been tested in any court or Tribunal, and whilst some are undoubtedly genuine, some may well not be.

MPs are now looking into the use of what they are describing as NDAs, with the Women and Equalities committee holding an enquiry into the use of NDAs in settling employment disputes. The committee has been told that their use is very widespread – something any employment lawyer had known for years! The committee has invited representations from interested parties so that they can make a recommendation as to the use of such clauses going forward.

Clearly, the use of non-disclosure or confidentiality clauses can cover up a multitude of sins, but of course the employee does not have to sign the Settlement Agreement. Obviously the reason employees sign Settlement Agreements is that they receive an additional payment from the employer, and if employers were not able to require that the fact and terms of the Settlement Agreement remain confidential, then it is likely that employers would be far more reluctant to offer settlements to departing employees. The impact of this would be significant. First, employers would be likely to offer far fewer Settlement Agreements which would of course mean that thousands of employees would lose out. Second, the number of disputes which would escalate to be resolved in the Employment Tribunals would increase substantially, and the Tribunal system is already creaking with the pressure of its workload which has increased massively since fees were abolished in 2016.

So, are confidentiality provisions necessary in Settlement Agreements? In theory, no – it is perfectly possible to settle disputes without requiring confidentiality. In practice, for most employers, yes. The majority of employers, and indeed employees, do not want details of their employment disputes or any settlement agreed between them being in the public domain. Is there a halfway house? I suspect it would be difficult to find a solution which would be acceptable to most employers, so it will be interesting to see what conclusions the Women and Equalities committee reaches.

If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.