The government has launched a consultation on curbing the use of so-called gagging clauses in settlement agreements and employment contracts. The consultation runs until 29 April 2019.

The current position

When an employee leaves employment, they may agreement a termination package with their employer which is recorded in a settlement agreement. Generally, the employee will give up their rights to bring employment claims in return for a payment from the employer. In order to be valid, an employee must currently receive independent legal advice as to the terms and effects of the settlement agreement and, in particular,  their right to bring claims in the employment tribunal.

It is very common (although not always the case) for the settlement agreement to contain a clause imposing confidentiality, often on both parties, so that the details of the agreement and the facts surrounding the termination of the employee’s employment cannot be disclosed to third parties.

Often the scope of confidentiality clauses will be restricted by carve-outs so, for example, the drafting makes it clear that the employee can talk about the agreement to their immediate family or disclose its terms for the purpose of taking tax advice.

The law as it currently stands prevents employers stopping employees from making protected disclosures (blowing the whistle). Any confidentiality clause which purported to do so would be ineffective to prevent an employee or ex-employee from blowing the whistle in accordance with the relevant legislation.

Confidentiality clauses are also commonly found in employment contacts where an employer seek to protect confidential information and trade secrets of which the employee may become aware during the course of their duties. No legal advice is currently required to be taken by the individual in order that these types of clauses are enforceable.

There are a number of different terms used for confidentiality clauses, including non-disclosure agreements (NDAs). NDAs can be standalone  agreements, they can also be clauses regarding confidentiality within employment contracts or settlement agreements. The consultation is focused on the such clauses in the context of the employment/worker relationships regardless of the label applied and whether they are found in a standalone agreement or as part of a wider contract or settlement.

Why is the government proposing these changes?

Set in the context of earlier stories about Harvey Weinstein in the USA and the #metoomovement they spawned, the government’s current proposals appear to have been prompted by the recent revelations about Sir Philip Green and his supposed attempts to silence employees who received pay-offs following allegations of harassment and discrimination through, the use of NDAs .

The government believes there is there is evidence that some employers have used confidentiality clauses to suggest victims of harassment cannot make any disclosures and intimidate them into silence when they have faced harassment or discrimination.

The Prime Minister said: “…too many are still facing the unethical misuse of non-disclosure agreements by their employers.”

Even within their legal limitations, the government believes that confidentiality clauses can be approached unethically and drafted in such a way as to hide from workers their rights and protections and intimidate them from making any kind of disclosure to anyone.

What changes are being proposed?

The government is seeking views on  three major changes in respect of the use of confidentiality clauses:

  1. legislating that no confidentiality clause can prevent a person making any disclosure to the police. This will make it clear that, regardless of what a confidentiality clause says, a victim can discuss a matter with the police or report a crime without fear of reprisal under a confidentiality clause.
  2. requiring that confidentiality clauses clearly set out their limitations, either in settlement agreements or as part of a written statement of particulars, so workers know the rights they do have when they have signed one.
  3. extending the requirement for a valid settlement agreement to ensure the worker receives independent legal advice specifically on any confidentiality provisions within the agreement, and its limitations.

The government also proposes that any confidentiality clause in a settlement agreement that does not meet new wording requirements will be void. The intention is to encourage employers to ensure they draft confidentiality clauses correctly otherwise they will be taking the risk that the reason behind the dispute is made public.

What happens next?

The consultation period runs until 29 April 2019. After that, the responses will be considered and draft legislation would be expected later in the year.

Published in…

Updates: For employers: Settlement agreements | For employees: Exit package |

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