Confidentiality clauses: new limitations?

Confidentiality clauses (sometimes referred to as non-disclosure agreements (NDA's)), have come under scrutiny recently in light of high profile sexual harassment cases.

There is a concern that employers may be misusing confidentiality clauses to suggest to alleged victims that they are bound to maintain total silence; despite the fact that such clauses cannot prevent certain disclosures, including protected disclosures ('whistleblowing').

The end of confidentiality clauses?

Upon reading the headlines, you could be forgiven for thinking that employers' ability to use confidentiality clauses may be set to end altogether.

However, the government's recently launched consultation recognises that confidentiality clauses can be appropriate in both:

Contracts of employment, to protect trade secrets and other confidential information; and
Settlement agreements, where they typically prevent the employee (and often the employer) from disclosing information relating to the dispute. This can benefit both parties by facilitating a clean break and encouraging settlement, particularly where there are disputed allegations made by both parties against the other.

The government wants to target the unethical misuse of, or lack of transparency in, confidentiality clauses.

Proposed changes

The government is proposing that confidentiality clauses in settlement agreements will be void unless they clearly state that they don't prevent protected disclosures; the reporting of criminal offences; or discussing any matter with the police. The consultation asks whether this list should include other disclosures, and notes that the government may issue guidance to encourage further best practice.

It is also proposing to extend the requirement that an individual must receive independent legal advice before signing a settlement agreement, so that this advice must cover the confidentiality provisions and their limitations.

Employment contracts would need to set out the same limits on confidentiality as settlement agreements, via workers' written statements of particulars. Failure to comply would not render the confidentiality provisions of the employment contract void; but workers would be able to raise the issue at a tribunal. They could seek a declaration or, if they raised it alongside another claim (eg. discrimination), they could be entitled to extra compensation.

Guidance from the Law Society of England and Wales

Recent guidance from the Law Society of England and Wales recommends that confidentiality clauses in settlement agreements should clarify that workers can still make certain disclosures - the suggested list of permitted disclosures in that guidance goes somewhat further than the government's current proposals.

In light of the Law Society's guidance, we have updated our template settlement agreement on Workbox, and Workbox users can find this at Draft a Settlement Agreement. If further amends are required as a result of the government's consultation, we will update this template.