To disclose or not to disclose, that is the question
It is undeniable that confidentiality and non-disclosure agreements (‘NDAs’) have their place. They are typically an important ingredient of the early stages of negotiations for mergers and acquisitions, for joint ventures and new contractual arrangements. They are also essential in the world of patents, where disclosing a new invention to a third party can actually stop the inventor from successfully getting patent protection unless an NDA was in place at the time. There can be few businesses out there that have never been asked to sign, or asked a third party to sign, an NDA.
However, recent media-led controversies surrounding the likes of Philip Green, Harvey Weinstein and Donald Trump have demonstrated the other side of the coin, and raised the question of whether NDAs should be enforceable when it comes to sexual assault and harassment. Should victims be legally required to keep matters confidential in return for what is normally a sizeable financial payment if they voluntarily sign an NDA?
Back in September, the Conservative MP for Basingstoke, Maria Miller, proposed a new law in Parliament that would restrict the use of NDAs. Her proposals stemmed from a report published by the Women and Equalities Committee in 2019 on the use of NDAs in discrimination cases, and her introductory speech to the House of Commons left MPs with no room for misunderstanding of her objective:
“We have some of the best laws and regulations in the world to protect people from bullying, discrimination and abuse in the workplace, yet we allow scurrilous employers to conceal unlawful wrongdoing through the use of non-disclosure agreements … Many hundreds, perhaps thousands, of people a year … do not have access to proper protection at work because we are allowing employers, through their lawyers and HR professionals, to cover up wrongdoing through an apparently legitimate means”
It would appear that rather trying to attack NDAs generally, her focus is on the use of NDAs, often contained within settlement agreements between employers and employees. She makes that very clear later on in her speech:
“My bill would … make it a basic principle of our legal system that no one, however powerful, could buy an employee’s silence if there were allegations of wrongdoing in the workplace. Putting that into practice is not simple … There is a powerful argument to completely ban NDAS … but we need to look to the legal sector to see whether there is a transparent way to resolve that tension. If not, a ban is the only option”
Her message is stark – either find a way to allow victims of employer bullying, discrimination and abuse to talk about their treatment without breaching the terms of an NDA or ban NDAs completely. Both options will of course cause some concern to employers. It is commonplace for employers to “buy the silence” of individuals, especially in circumstances where elements of discrimination or harassment are concerned. Should employees be free to discuss their treatment with the outside world, irrespective of the contents of a settlement agreement, employers may be less likely to offer a financial settlement to employees.
Prior to government legislating on NDA’s, public sector employers have already began voluntarily removing NDA’s from their settlement agreements. The Department for Work and Pensions removed NDA’s from their settlement agreements in 2015, with the House of Commons following in 2016. Recent settlement agreements from the BBC have also omitted NDA’s however it is not known if this is now general policy. Former Health Secretary Matt Hancock also committed to ending NDA’s in the NHS in 2019, however it is unclear if this was ever actioned.
There is, of course, already some protection in place for employees. The Public Interest Disclosure Act 1998 protects employees from detrimental treatment if they ‘blow the whistle’ on illegal activity by their employer, even where an NDA is in force. However, Mrs Miller’s proposals look at going much further than that when they are next debated in the House of Commons on 18th March 2022, when MPs will be given the opportunity to decide whether it is a law worth moving towards the statute books, or whether it should be withdrawn.
What is clear is that the tide is turning on NDA’s and whether legislation is passed or not, employers should begin thinking carefully about their use in settlement agreements in the future.
These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.