Non-disclosure agreements: what employers need to know

There are various sets of guidance in place on using non-disclosure agreements (NDAs). In addition the UK government has proposed making NDAs unenforceable where they seek to prevent an employee from disclosing information about criminal conduct.

When are NDAs used in an employment context?

Stand-alone NDAs are rare in an employment context. However, employees are often asked to enter into confidentiality clauses in contracts of employment and settlement agreements:

• In contracts of employment, confidentiality clauses seek to prevent the unauthorised use and disclosure of confidential information belonging to the employer during employment and following termination. The definition of confidential information is usually tailored so that it covers all commercially sensitive and other confidential information the employee might have access to.
• On termination, as well as emphasising the continuing nature of the obligations of confidentiality set out in the contract of employment, a settlement agreement will often restrict the employee from disclosing details of the circumstances surrounding their departure and the fact and terms of settlement.

NDAs which prevent disclosures about criminal conduct

NDAs came under intense scrutiny following the #MeToo movement and the various high-profile allegations of sexual harassment and assault. This led to several inquiries and reports and then, in its response to the 2019 consultation on confidentiality clauses, to a commitment from the UK government to legislate to limit the scope of confidentiality provisions in employment contracts and settlement agreements.

In March 2024, the government indicated that legislation will be introduced to stop employers from using NDAs to prevent employees from reporting a crime. Following the general election announcement, however, it is now not clear whether and when this might happen.

If enacted, the proposals would allow employees to discuss 'information related to criminal conduct' with the following groups:

• Police or other bodies that investigate or prosecute crime;
• Qualified and regulated lawyers; and
• Other support services that operate under clear confidentiality principles such as counsellors, advocacy services and medical professionals.

The government indicated that 'disclosure will be permitted providing it is relevant to criminal conduct and for the purpose of reporting a crime or accessing support or advice'.

What about other types of disclosure?

The proposals are limited to the disclosure of criminal conduct to certain professionals. They would not impact NDAs which (i) prevent the disclosure of different types of information; or (ii) prohibit employees from discussing criminal conduct with other people such as family members, new employers or counsellors who are not bound by a duty of confidentiality. However, all employers using NDAs should bear the following in mind:

• Any confidentiality provisions which try to prevent an individual from making a protected whistleblowing disclosure are void.
• When the Higher Education (Freedom of Speech) Act 2023 comes into force it will prevent higher education providers in England and Wales from entering into NDAs in relation to sexual abuse or harassment, sexual misconduct and/or other types of bullying.
• In 2019 the Equality and Human Rights Commission published best practice guidance on the use of confidentiality agreements in discrimination cases. This was followed in 2020 by guidance from Acas. The guidance includes recommendations that employers should consider on a case-by-case basis whether an NDA is needed and, if it is, ensure that it does not go beyond what is necessary and appropriate in the circumstances. It also suggests allowing disclosures to a wider category of person than the government is proposing e.g. to family members providing they agree to keep the matter confidential.
• In 2018 the Solicitors Regulation Authority ('SRA') issued a warning notice reminding its regulated solicitors and firms of the key issues and risks associated with using, or advising on the use of, NDAs. The SRA is going to review the warning notice following its 2023 report on the use of NDAs in workplace complaints.

What does this mean in practice?

Although there can be legitimate reasons for using NDAs, there continues to be scrutiny around the extent to which they prevent employees from taking action, particularly following allegations of discrimination and harassment. Any employers using NDAs need to be aware of the relevant guidance and look out for any developments.

It is best practice to consider – both at the start of the employment relationship and on termination - what confidentiality restrictions are legitimately required for that particular individual. Also, any contract of employment or settlement agreement should make it clear what the employee is not prevented from doing. This can be done by including carve-outs stating that, notwithstanding their confidentiality obligations, the individual can make certain types of disclosure e.g. to the police, medical professionals etc.

The confidentiality provisions in the contracts of employment and settlement agreements on Workbox by Brodies, our award-winning online HR and employment law site, have been drafted to take account of the guidance referred to above. If you are not currently a Workbox user and would like a free online demo or more information, please get in touch.