Confidentiality Agreements (NDAs)

Following the #metoo scandal there has been a huge political momentum against overreaching confidentiality clauses and the effect that they have, or are perceived to have, on victims of harassment and their ability to speak up. As a result, in March 2019 the Government confirmed that confidentiality clauses require better regulation. It subsequently issued a consultation on measures to prevent the misuse of confidentiality clauses in the workplace.

Currently confidentiality clauses are usually used in either the contract of employment to protect trade secrets and other similar confidential information or in settlement agreements to restrict the disclosure of the terms of the settlement. However, in some settlement agreements, confidentiality clauses have been used to keep the existence of the agreement confidential along with any allegations being made by the employee (e.g. sexual misconduct or complaints of discrimination). This has led to concerns about their use.

The government is not advocating an outright ban on the use of confidentiality clauses, but simply to restrict them so that they do not result in the cover-up of potentially serious misconduct. As part of the consultation the Government is considering a law to make it clear that confidentially clauses cannot prevent a disclosure to the police and, potentially, other bodies.

In addition to the above, there is a general concern about individuals’ ability to understand the confidentiality clauses by which they are agreeing to be bound, and it has been recommended that employment contracts use standard approved clauses. However, there is commentary from the government to confirm that standard wording could quickly become outdated and, therefore, not be useful long term. In settlement agreements the position is slightly different as the individual must seek independent legal advice and the adviser should be advising on the full extent of any confidentiality clause contained within the agreement.

When it comes to enforcement there is again a distinction drawn between employment contracts and settlement agreements. The government recognises that deeming confidentiality clauses in employment contracts void in their entirety could unfairly prejudice employers, as it could lead to trade secrets being exposed. It therefore proposes to require the limits of any confidentiality provisions to be clearly set out in the employment contract, with any breach being actionable in the Employment Tribunal as a failure to provide the obligatory written particulars of employment. By contrast, the current proposal is for confidentiality clauses in settlement agreements to be deemed void in their entirety if they do not comply with any new requirements introduced.

What the consultation does not make clear is whether any changes would apply to agreements drafted before any new legislation comes into force, but which the parties seek to enforce after that date.

Due to the current Government timetable the result of the consultation is unlikely to be forthcoming until the later this year. Employers should keep a weather eye on the progress of the consultation.

Claire Helling, Senior Solicitor

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