At the beginning of March, the Government launched a consultation on measures to prevent misuse of confidentiality clauses in situations of workplace harassment or discrimination. This consultation comes in response to a Women and Equalities Select Committee report, following which the government made clear that “harassment of any sort is abhorrent and cannot be tolerated in the workplace”.
The purpose of the consultation, which is open until 29 April 2019, is to obtain evidence and views on the use of confidentiality clauses in the employment context and to propose further regulations to tackle their misuse.
Legitimate use of confidentiality clauses
Whilst the consultation is focused on the misuse of confidentiality clauses*, the Government recognises that the proper use of confidentiality clauses is essential in the employment context. Confidentiality clauses are primarily used in the following ways:
- as part of an employment contract to protect confidential information or trade secrets (which are normally defined within the contract); or
- as part of a settlement agreement to prevent information relating to a dispute being disclosed and, more generally, so that both parties can move on with a clean break.
*The Government’s reference to confidentiality clauses also includes non-disclosure agreements (“NDAs”) which are generally standalone confidentiality agreements.
Legal limitations on confidentiality clauses
The Government is concerned that employees are not aware of the legal limitations on the use of confidentiality clauses and that they are therefore agreeing to all-encompassing confidentiality clauses with some employers who exploit the imbalance of power in the employment relationship. The concern is that this is leading employees to think that they cannot disclose information when often they legally can.
(a) Confidentiality clauses cannot remove the protections of someone making a protected disclosure, more commonly referred to as “whistleblowing”. The test for making a protected disclosure is as follows:
- that it is the disclosure of information about wrongdoing (i.e. a criminal offence, a breach of legal obligation, miscarriages of justice, danger to health and safety, damage to the environment or deliberate concealing of information about any of the aforementioned); and
- that the worker making the disclosure reasonably believes it is in the public interest.
(b) A standalone confidentiality clause (in an employment contract, for example) cannot ordinarily prevent someone from bringing a claim in an employment tribunal. A person can waive this right, however, by entering into a legally binding settlement agreement.
(c) Case law has also established that confidentiality clauses cannot be unlimited and that the information being protected must have the “necessary quality of confidence”.
The Government is seeking to identify further limitations to the scope of confidentiality clauses to ensure that they cannot be misused and to make clear to workers (including employees) what they can and cannot cover.
The Government believes that the law should be reformed to make it clearer to whom a victim of harassment or discrimination can disclose, without breaching their confidentiality clause. Specifically, it wants to legislate to the effect that “no provision in an employment contract or a settlement agreement can prevent someone making any kind of disclosure to the police”. The Government is also considering whether other individual recipients should be added to this list, such as doctors or therapists.
There is currently a statutory requirement for an employee to have received legal advice before entering into a settlement agreement for it to be a binding and enforceable agreement. The Government is considering whether to extend that requirement specifically to advice on the meaning of a confidentiality clause and particularly relating to the limits on what the employee can or cannot disclose. If that requirement is not met, then the clause would be void.
Whilst the Government is not in favour of prescribed wording for confidentiality clauses, it does believe that confidentiality clauses should include clear carve-outs on various disclosures which are not, or cannot, be protected.
In the wake of the #MeToo movement, stories of NDAs used to silence sexual harassment claims have been rife, most notably in the UK with the news that Sir Philip Green allegedly used NDAs to silence and pay off former employees accusing him of sexual harassment and racism. Given the current political climate, the Government’s consultation may lead to important changes to the law of confidentiality in the employment context.