Government reforms (1):  Non-disclosure agreements (NDAs) – Response to WESC report

sexual harrassment in the workplace

What do we already know?

In June 2019, the Women and Equalities Select Committee (WESC) published its report on the use of confidentiality clauses, which are also known as Non-Disclosure Agreements (NDAs), in discrimination and harassment cases. The WESC concluded that the imbalance of bargaining power between employers and employees is a key driver behind the widespread use of NDAs, and made 45 recommendations for ensuring NDAs do not prevent legitimate discussion around, and investigation of, sexual harassment and discrimination.

We also updated you in our August 2019 Newsletter, Government Reforms (3): Response to Consultation on Confidentiality Clauses, that the Government had issued a response to its own consultation on the use of NDAs in employment contracts and settlement agreements.  This response included commitments by the Government to introduce:

  • legislation curbing the use of non-disclosure provisions in employment contracts and settlement agreements; and
  • a requirement for individuals to obtain independent legal advice when entering into NDAs.

Also, we updated you in our October 2019 Newsletter, New guidance – 2. EHRC Guidance on NDAs in Discrimination cases, that the Equalities and Human Rights Commission (EHRC) produced guidance on using NDAs in discrimination cases.

What’s new?

The Government has published its response to the Women and Equalities Committee’s (WESC’s) report on the use of non-disclosure agreements (NDAs) in discrimination cases, available here.

Overall, the Government agrees that the use of NDAs to cover up cases of sexual harassment and discrimination is unacceptable and that they are used to silence and intimidate victims. However, the Government considers there is a legitimate place for NDAs within employment contracts, although that the right balance must be achieved between allowing legitimate use and preventing misuse.

Although the Government’s response to the WESC’s report restates much of what we know already (from its response to its own consultation on this (as described above), it also addresses some additional points.

What will the Government do on NDAs?

The Government restates that it will:

  • introduce new legislation to restrict the use of NDAs and ensure that these limits are clearly set out in employment contracts and settlement agreements;
  • legislate that no term in a NDA can prevent disclosures to the police, regulated health or care professionals and legal professionals; and
  • require independent legal advice to be provided to individuals who are asked to sign an NDA.

As well as these steps, the Government also commits to taking forward WESC’s recommendations to:

  • produce guidance for solicitors and legal professionals responsible for drafting settlement agreements;
  • introduce enforcement measures for NDAs that do not comply with legal requirements in written statements of employment particulars; and
  • strengthen corporate governance, requiring companies to meet their responsibilities to protect employees from discrimination.

The Government has also committed to considering further the following recommendations:

  • Consult on whether to introduce a statutory duty on employers to provide a basic factual reference for former employees. The Government accepts that failure to provide a reference can pose a problem for victims of discrimination. See the Government’s Press Release on this here.
  • Require employers to investigate all discrimination and harassment complaints regardless of whether it reaches a settlement (as per the EHRC guidance).
  • Run an awareness-raising programme about how to handle grievances fairly and effectively.
  • Examine the possible adverse effect on individuals of publishing Tribunal judgments online, and exploring what potential safeguards it could put in place.
  • Consider responses to a consultation on the proposal to extend time limits for claims of sexual harassment, pregnancy and maternity discrimination.
  • Review the legal aid means test and improve awareness of how people can access legal support.
  • Consider the concerns raised relating to litigants in person and assess how to improve existing support materials and guidance.
  • Ensure independent legal advice on settlement agreements is extended to cover any concerns about the reasonableness and enforceability of NDAs.
  • Consider calling for employers to appoint a named senior manager at board level or similar to oversee anti-discrimination and harassment policies and procedures and to oversee the use of NDAs in discrimination and harassment cases.
  • Consider the requirement to report on maternity retention rates.

 

What will the Government not do on NDAs?

However, the WESC recommendations that the Government says it will not be taking forward include:

  • Remedies: the WESC had recommended various increases to the remedies available in sexual harassment claims: an introduction of punitive damages, a presumption that employers would pay the employee’s legal costs in successful claims, and a significant increase to awards for injury to feelings.
  • Carve-outs from NDAs: the Government has confirmed that its new legislation will require a carve-out in NDAs for disclosures to the police and legal/healthcare professionals, but it will not extend that carve-out to friends, family or victims. This is because this latter group would not themselves be subject to confidentiality requirements, so may circumvent the intended purpose of the NDA.
  • Legal advice: the Government has confirmed that its new legislation will require independent legal advice to be taken by any individual asked to sign an NDA. However, it will not require employers to meet the cost of that advice in full. Instead, the Government states that employers should ‘contribute appropriately’ to these costs, but suggests that the new legislation will not dictate any amounts.
  • Standard wording: the Government will not be mandating standard wording for NDAs but it has committed to produce guidance on the drafting requirements.

Comment: The WESC may be disappointed by the limited number of its recommendations that the Government is immediately taking forward. However, WESC’s recommendations did address issues wider than regulating NDAs and the Government has already taken some steps.

With an imminent general election on 12 December 2019, it is difficult to predict when we will see further progress in this area and what the proposed legislation will look like.  We’ll be sure to update you when we have more news on this.

We do not expect that the coverage of NDAs by the requirement to take legal advice ought to increase the legal costs associated with settlement agreements.  Our experience is that lawyers already always include any NDAs present in their existing advice and costings.