March 12, 2019

#Metoo: Consultation on confidentiality clauses

The government is consulting on new measures aimed at preventing misuse of non-disclosure agreements. The proposals follow press reports about a small minority of employers who seek to intimidate and silence employees from speaking out about workplace harassment and discrimination, including sexual assault, physical threats and racism.

As outlined by the consultation, confidentiality clauses have a right and proper place in the employment context.  They can be used primarily in two ways: as part of employment contracts, such as to protect trade secrets and other corporate confidential information, and as part of a settlement agreement, such as to allow both sides of an employment dispute to move on with a clean break.

The consultation paper helps to dispel some myths and sets out a useful summary of the current rules around confidentiality clauses.  Key points are –

  • They cannot remove the protections around protected disclosures (whistleblowing).
  • They cannot ordinarily prevent someone taking a matter to an employment tribunal (although a settlement agreement can remove that right).
  • They cannot completely ban the employee from talking about anything that occurs in the workplace.

The proposals which the government is consulting on are as follows –

  • Banning confidentiality clauses which prevent a victim reporting or discussing any kind of disclosure with the police.  Currently, the whistleblowing rules would protect a worker when reporting certain matters (namely "protected disclosures") to an employer, or other responsible person, or one of a list of "prescribed persons" (usually a relevant regulator or professional body).  Wider qualifying disclosures, such as to the police and even the media may also be protected but these disclosures are subject to more rigorous conditions than a simple disclosure to the employer: the worker must have a reasonable belief that the information is substantially true and must not be motivated for personal gain. Currently, whether an allegation of harassment would be a protected disclosure would depend on the circumstances so it's often difficult for a victim to know if they would be protected for reporting harassment.  This proposal means that whatever the issue or disclosure, regardless of whether it meets any legislative whistleblowing tests, a victim can report a matter to the police without falling foul of the whistleblowing rules. Clearly, however, individuals have a duty not to mislead the police so there are laws in place to protect employers from malicious and false complaints to the police.
  • Ensuring that confidentiality clauses in employment contracts are included in the written statement of particulars of employment issued to the employee at the start of employment. If the employer fails to comply with this, the employee can resort to the existing resolution mechanism and claim compensation of two to four week's pay for failure to provide a compliant written statement. 
  • Requiring confidentiality clauses to provide which disclosures the clause does not prohibit. These include making a protected whistleblowing disclosure, reporting a criminal offence (or discussing any matter with the police) and highlighting other relevant statutory obligations (such as disclosing information to a court).
  • Extending the independent advice given to a worker when entering into a settlement agreement.  For a settlement agreement to be valid, the consultation proposes that the independent advice a worker receives must cover the nature and limitations of any confidentiality clause in the settlement agreement and the disclosures that a worker is still able to make.
  • Making any non-compliant confidentiality clauses in settlement agreements void in their entirety. In practice this means that an employee who breaches the clause could not be sued for doing so. The principal effect of this would be the reputational risk to the employer once the confidentiality over the reason for the employment dispute is removed.

What this means to employers

In order to comply with the new rules, employers will need to change standard form clauses in the written statement of particulars which they give to employees at the start of employment (often in the form of an employment contract) and in settlement agreements. Employers will still be able to protect their confidential information in the usual way and employees will still be bound by properly drafted confidentiality provisions.  But if employers do use non-compliant confidentiality clauses in settlement agreements, they may find themselves unable to enforce the confidentiality provisions in their entirety, putting them at risk of reputational damage. 

Importantly, not only will employees be clearer about their rights under the new rules, employers will no longer be able to bully employees into keeping quiet over potential criminal acts that victims should be free to report to the police. Employers wishing to enter into a settlement agreement with an employee must therefore do so in the knowledge that allegations of criminal behaviour could still be reported to the police, regardless of what settlement sum has been paid.  But this should not worry employers who properly investigate the allegations and, if they are well founded, deal with the perpetrator appropriately. When it comes to reputational risk, often the best course is to openly admit what has happened and be seen to be dealing appropriately with the perpetrator. 

The consultation will run until 29 April.

Confidentiality clauses: measures to prevent misuse in situations of workplace harassment or discrimination.