When an employer signs a settlement agreement with a departing employee, it will usually contain confidentiality provisions. At the most basic, this will simply stop the employee telling everyone how much he was paid. But the clauses can also prevent either party talking about the circumstances of termination or events during the employment.
Recently these clauses, which tend to be referred to in the press as Non-Disclosure Agreements, or NDAs, have attracted a lot of attention. Disgraced Hollywood mogul Harvey Weinstein is alleged to have repeatedly made use of NDAs to cover up a pattern of sexual misconduct that sparked the #MeToo movement. In the UK, Sir Philip Green was alleged to have used NDAs to cover up allegations of sexual and racial harassment. NDAs also have wide use outside the employment sphere- family members who wanted to visit Game of Thrones cast on set were required to sign one to prevent them leaking plot spoilers, and companies considering a merger commonly sign NDAs before disclosing business secrets to one another in negotiations.
Understandably, the use of NDAs to silence serious allegations from current or former employees has attracted the attention of parliament. The government has now released details of the legal changes they plan to make “when parliamentary time allows.” Given the government is rather preoccupied currently, this may be some way off.
Press speculation on NDAs included extreme proposals like banning them entirely. However, the government have recognised that they often serve a useful purpose, allowing both parties to move on from a dispute. Instead, they have suggested a very limited approach, most of which employers will already be following as best practice.
The proposals are:
Settlement agreements and employment contracts with confidentiality clauses must clearly set out the types of disclosure that are permitted, such as disclosure to the police or under whistleblowing legislation.
The independent legal advice employees take on settlement agreements must include explanations of the effect of the confidentiality clause. It is hard to see a solicitor would feel they had discharged their professional duties adequately without doing this now, but presumably the certificate the solicitor is asked to sign will be updated to include confirmation that this advice has been given.
That clauses which do not comply with drafting and advice requirements will be void (although the government response is unclear on this point, this seems to be the intention). A proposal to make it a criminal offence for employers and/or solicitors to put forward a clause which purports to restrict police or whistleblowing disclosures was rejected.
To assist employers in complying with these responsibilities, guidance will be produced on best practice wording. Employers will also be required to give a plain English explanation of the effect of the clauses, after reports many employees were confused about the breadth of their obligations. The idea of requiring standard wording for all NDA clauses was rejected as insufficiently flexible.
One surprising area where changes were rejected was disclosure to therapists and counsellors. Many employee bodies argued that this was necessary to help employees move on from what has happened to them, and moving on is one of the key benefits the government sees from an NDA. However, the government said that these people (unlike doctors) are not regulated professionals for confidentiality purposes, so it would be inappropriate to extend the right to disclose to cover them. This will come as a big blow to employee advocates.
The government is also running a consultation on workplace harassment, so these reforms may later form part of a larger reform of employment legislation. In the meantime, employers following best practice are unlikely to need to make an immediate changes.