Posted: 25/04/2024
A previous article highlighted changes to employment regulations that have been introduced this April. A conspicuous absentee from this list was any new regulation regarding the use of non-disclosure agreements in the settlement of employment disputes.
Reform in this area has been on the agenda since 2017 following the #MeToo campaign and the revelations around the conduct of Harvey Weinstein. In evidence given to the Women and Equalities Committee in 2019, Zelda Perkins, who had been employed as Mr Weinstein’s personal assistant in the UK, famously told of the harrowing experience of having to sit in the same room as Mr Weinstein, and his lawyers, as she and her colleague and their lawyers sought to agree terms to settle claims against Mr Weinstein, including extensive negotiations of confidentiality clauses by which Mr Weinstein sought to protect his reputation.
Cases concerning grievances raised at work which involve allegations of inappropriate sexual and other protected harassment, bullying and discrimination are difficult and time-consuming disputes. Allegations are serious and obviously highly charged on both sides of the issue. If a complaint is not upheld, or the employer believes that the conduct is not so serious as to justify dismissal of the perpetrator, mediating between the two employees with a view to them working together again can be very difficult.
In those circumstances, unless workplace changes can be agreed so that the individuals do not come into contact, one avenue left for the employer is to seek to agree the termination of the employment of one or other of the employees through negotiation. Eventually, many such matters are settled through the employer paying the employee a sum of money and the employee signing a settlement agreement.
A settlement agreement will obviously prevent future claims being raised, which stops potentially embarrassing evidence being aired in the public forum of the Employment Tribunal. Settlement agreements will also include confidentiality provisions (commonly known as non-disclosure agreements) to prevent the employee from, for example, discussing the settlement with other employees (including the amount of compensation paid) or airing their (potentially embarrassing/damaging) allegations publicly.
On the one hand, a settlement agreement will have to be finalised through negotiation where both parties are represented. Arguably, therefore, at this stage, there is equal bargaining power. Obviously, part of the benefit to the employer of agreeing a deal is to prevent the reputational damage of allegations becoming public and, in some situations, an employee’s lawyer will certainly use this to further their negotiation.
On the other hand, there is a strong moral argument for NDAs not to be used to prevent disclosure of this type of unlawful behaviour, and that it is not in the public interest for such behaviour to go unpunished and/or be hidden from view. To a certain extent, this is recognised by the law already – clauses which seek to prevent an employee making a protected disclosure are void. However, the law of protected disclosures is very complex and it is not always clear whether or not the disclosure will be protected. The #MeToo campaign also highlighted that in some cases NDAs had been inappropriately used to seek to prevent the complainant from reporting criminal matters to the police.
In 2019 the Women and Equalities Committee recommended that legislation should be introduced to regulate NDAs, such that all employers should be obliged to investigate all complaints of discrimination and harassment (regardless as to whether or not a settlement is reached), and that the mandatory independent legal advice required for settlement agreements should be extended to cover the enforceability and reasonableness of an NDA.
In its response to the consultation on NDAs, the government committed to legislate ‘when parliamentary time allows’ and legislation was expected to follow. The requirement to investigate even where a settlement has been reached is a problematic issue. What if the employee does not want further investigation, and wants to draw a line under the issue?
Since 2019, other than specific legislation for higher education, no new laws have been brought forward on NDAs. Instead, the government has relied on the guidance of regulators, specifically the Solicitors Regulatory Authority and the Law Society, who have published warning notices and guidance notes to practitioners as to how they should conduct themselves when negotiating such clauses, and what they should and should not contain. ACAS and the EHRC have also published non-statutory guidance on their use.
As such, settlement agreements now almost universally contain provisions which specifically state that despite the confidentiality provisions, they do not prevent, for example, the employee making a protected disclosure or a complaint to the police, or to a regulator. In March this year, some five years after it initially said it would legislate, the government has now confirmed that it will (again – ‘when parliamentary time allows’) legislate simply to clarify that NDAs cannot be legally enforced if they prevent victims from reporting a crime.
It is fair to say that the government has strengthened the law elsewhere by making it a mandatory obligation on employers to take reasonable steps to prevent sexual harassment in the workplace. However, the appetite to legislate further on NDAs seems very limited.
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