Employment news

Government consults on regulation of non-disclosure agreements

The Government has published a consultation paper setting out how it proposes to take forward the recommendations made by the Women and Equalities Committee to regulate the use of non-disclosure agreements.

The headline is that the Government is not advocating an outright ban on the use of confidentiality clauses but intends to impose conditions that restrict their use. It acknowledges that confidentiality clauses have a “right and proper place” in the employment context – as part of employment contracts to protect confidential information, and as part of settlement agreements to allow both sides of an employment dispute to move on with a clean break.

The consultation looks at the uses of confidentiality clauses in both settlement agreements and in contracts of employment.

Given the evidence that a minority of employers are misusing confidentiality clauses particularly to silence whistleblowers and/or to conceal cultures of discrimination and harassment, the Government proposes that for a settlement agreement to be valid the independent advice which an employee receives must cover the nature and limitations of any confidentiality clause and the disclosures the individual is still able to make; no provision in a settlement agreement would prevent someone from making any kind of disclosure to the police; and a confidentiality clause in a settlement agreement that does not meet the new wording requirements would be void. The government is not proposing standard, approved wording for employers to use in settlement agreements.

There is an acknowledgment that as part of employment contracts, confidentiality clauses have an important role to play in protecting trade secrets and other confidential information. However whilst it is opposed to standard approved wording in contracts it does propose to legislate so that no provision in a contract of employment can prevent someone from making any kind of disclosure to the police; the limits of any confidentiality clauses must be made clear in the written statement of particulars given to all employees; and any failure to comply will mean that increased compensation could be awarded.

Whilst many observers have welcomed the proposals there have also been warnings that they do not go far enough in preventing harassment in the workplace.

Some have focused on the Government’s rejection of the Select Committee’s recommendation that it should become an offence to propose confidentiality clauses designed to prevent the disclosure of a protected disclosure or a criminal offence.

The CIPD has argued there is also a case for allowing employees to go to bodies such as the Equality and Human Rights Commission (EHRC) to report concerns over settlement agreements and to get advice on whether incidents breach the Equality Act as well as being potentially a criminal offence. It has also backed the idea of greater standardisation of confidentiality clauses, and that independent legal advice should specifically cover the provisions of these clauses.

The EHRC itself, whilst welcoming the proposals as progress has warned that the measures alone would not be enough to drive sustained cultural change.

The consultation ends on 29 April 2019.