The future of confidentiality clauses: Government consultation response

The response has now been published and contains a number of important proposals for change.

In March 2019, the Government launched a consultation to seek evidence and views on the use of confidentiality clauses in an employment context. This arose from a number of high profile cases of sexual harassment and revelations that, in some cases, individuals had been required to agree to extremely onerous ‘non-disclosure agreements’ (NDAs) to resolve their complaints. The Government has now published its response to this consultation setting out proposals for change.

The consultation acknowledged that confidentiality clauses are routinely used legitimately in an employment context, primarily in two ways: as part of an employment contract to protect commercially sensitive information; and within a settlement agreement to provide both sides to an employment dispute with a ‘clean break’.

The stated aim of the consultation was to explore additional measures to ensure that the use of confidentiality clauses is not abused in either of these contexts, to prevent individuals speaking out or seeking help following sexual harassment or discrimination.

The proposals

Already, a confidentiality clause cannot legally prevent an individual from making a protected disclosure (or ‘whistleblowing’). However the consultation response proposes a number of additional measures to provide additional protection and clarity. Most notably, the Government will:

  • Legislate to make clear that no provision in an employment contract or settlement agreement can prevent someone from making any kind of disclosure to the police. It will also be made clear that disclosure to regulated healthcare and legal professionals (who are themselves subject to a professional duty of confidentiality) is always permitted.
  • Ensure that the limits of confidentiality clauses are clearly set out in the settlement agreement. Where the confidentiality requirement is imposed at the start of the employment relationship, the limits of such a clause should be set out in the employment contract or statement of employment particulars.
  • Produce drafting guidance for employers and legal professionals to make sure that confidentiality clauses are drafted clearly and specifically and that the effects and limits of such clauses are clearly explained. Guidance will be produced in conjunction with ACAS, the Equality and Human Rights Commission and the Solicitors Regulation Authority. The Government does not intend to introduce mandatory pro-forma wording for confidentiality clauses, conceding that this would unduly limit flexibility.
  • Extend the current law to specify that the independent legal advice which an individual must receive before signing a settlement agreement must include a full explanation of the impact and extent of any confidentiality clause. This issue should be covered as a matter of course but, of course, may not be fully explored in all cases.
  • Introduce new enforcement measures where a confidentiality clause in a contract of employment/statement of employment particulars does not comply with new drafting requirements. Essentially, the individual will be eligible for additional compensation if they bring another successful claim in the Employment Tribunal. Importantly, these new enforcement provisions will not apply retrospectively.

The consultation response confirms that the Government does not intend to take forward a proposed new reporting duty, which would require employers to publish annual data on the number and type of discrimination and harassment complaints received (along with their outcomes) and the number of settlement agreements entered into which contain confidentiality clauses.

This will undoubtedly come as a relief to employers and the Government concedes that, in any event, such data viewed out of context is unlikely to be meaningful. The fact that an organisation has entered into a large number of settlement agreements in a given year does not, of course, necessarily indicate a culture of sexual harassment, given the vast array of workplace situations that might result in a negotiated exit. Instead the Government intends to focus on preventing sexual harassment and discrimination in the first place.

Comment

It is important to note that the consultation document simply sets out an intention to legislate ‘when Parliamentary time allows’ and no indication is given of how long this might take. Despite the Government’s clear commitment to this issue, reform of the law on confidentiality clauses is unlikely to be at the very top of its ‘to-do’ list given the pressing concerns of Brexit.

We are also unlikely to see any movement before publication of the outcomes of the parallel Government Equalities Office consultation on sexual harassment in the workplace which considers potential changes to the law and wider workplace culture and does not close until early October.

However, while we wait for detailed draft legislation to be published, it is still possible to make a start on preparing for these changes. Consider at an early stage existing contracts of employment and template agreements likely to fall foul of the new transparency regime which may need to be redrafted. We are of course happy to assist.

Louise Singh is a Professional Support Lawyer supporting the national Employment, Pensions and Immigration team. If you have any questions, please do not hesitate to contact Louise on 0151 242 6520 or louise.singh@weightmans.com, or speak to your usual Weightmans advisor.

The consultation response is available in full online here.

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