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Government launches consultation on measures to prevent misuse of confidentiality clauses in situations of workplace harassment or discrimination

  • United Kingdom
  • Education - Briefings

07-03-2019

The Government has published an important consultation document this week aimed at increasing protection for employees in relation to the use of confidentiality clauses in contracts of employment and settlement agreements. The consultation closes on 29 April 2019 and can be found here.

Background to the consultation announcement

Last year, both the Women and Equalities Committee and the Equality and Human Rights Commission each proposed several measures aimed at addressing sexual misconduct and harassment in the workplace and increasing employer engagement and responsibility. These proposals included recommendations which would restrict, or even ban, the use of non-disclosure or confidentiality clauses.

Confidentiality clauses are often included in employment contracts, for example, to protect trade secrets or other similar confidential information, and in settlement agreements to restrict for example the disclosure of the terms of the settlement. However, the use of confidentiality clauses in settlement agreements under which the individual agrees to keep the existence of the settlement agreement, and its terms, confidential - even where they relate to sexual misconduct and discriminatory complaints - has been criticised. Those wanting a ban on such terms argue that secrecy enables employers to suppress information about complaints and avoid tackling systemic problems, potentially allowing predatory employees to act again. Those opposing a ban fear that restricting secrecy in settlement agreements will deter employers from settling claims – which would not help those complainants who prefer to settle to avoid re-living distressing events and for those who want confidentiality in their settlement terms.

Consultation proposals

In its consultation proposals, the Government is not advocating an outright ban on the use of confidentiality clauses but intends to impose conditions which restrict their use.

The Government acknowledges that confidentiality clauses have a “right and proper place” in the employment context as part of employment contracts, to protect confidential information, and as part of settlement agreements, for example to allow both sides of an employment dispute to move on with a clean break. 

However, the Government believes that there is evidence that despite existing limitations on confidentiality clauses (for example, they cannot remove the right to make protected disclosures or the protections for those making such disclosures), some employers have used confidentiality clauses to suggest that victims of harassment cannot make any disclosures and “intimidate them into silence when they have faced harassment or discrimination”.

Therefore the consultation seeks views on what further limitations might be placed on confidentiality clauses, to ensure they cannot be misused and to clarify what they can and cannot restrict.

In particular the Government is consulting on:

Clarifying the law to make clear no confidentiality clause can prevent any disclosure to the police and, potentially, other bodies

The Government believes a key reform would be to make the law clearer about to whom a disclosure can be made without falling foul of a confidentiality clause. Although, to some extent, whistleblowing legislation already provides for this, the Government notes the concern expressed by the Women and Equalities Select Committee, that the complexity of whistleblowing legislation makes it difficult for workers to be sure whether a particular disclosure would be protected.

The Government proposes to legislate to provide that no provision in an employment contract or a settlement agreement can prevent someone making any kind of disclosure to the police, although the consultation asks whether all such disclosures should be clearly excluded from confidentiality clauses. It also asks whether all disclosures to any other people or organisations be excluded - though the Government says it is wary of making this list too broad.

Ensuring the limits of confidentiality clauses are clear to the worker

The Women and Equalities Select Committee recommended that the Government should legislate to require the use of standard, approved confidentiality clauses which set out the meaning, effect, and limits of confidentiality clauses in both settlement agreements and employment contracts.

The Government agrees that additional requirements are needed to ensure that confidentiality clauses are clearer in their scope and their limitations as it is important that workers understand the rights they retain when signing them so that they “cannot be intimidated out of disclosing information about harassment or discrimination”.

The consultation therefore asks whether all confidentiality clauses in settlement agreements and written statements of employment particulars should be required to clearly highlight the disclosures that are not prohibited and whether the Government should set out a specific form of words. On this latter point, which was recommended by the Select Committee, the Government is concerned that requiring a single form of words could become quickly out of date as other protections develop over time. It would therefore appear that the Government is not keen on this approach.

In relation to settlement agreements, section 203(3) of the Employment Rights Act 1996 requires that the worker has received advice from an independent adviser as to the terms and effect of the agreement. The Government points out that, while this advice should ideally cover the nature of any confidentiality requirements, it might not always cover the extent to which a worker is still able to discuss their experience with anyone. Therefore the Government proposes to extend the current legal requirements to specify that, for a settlement agreement to be valid, the independent advice a worker receives must cover the nature and limitations of any confidentiality clause in the settlement agreement, and the disclosures that a worker is still able to make.

Enforcement

The Government believes that that enforcement measures in respect of confidentiality provisions in employment contracts and those in settlement agreements would need to be different, as they are used in different stages in the employment relationship and may be enforced in different courts. For example, employment tribunals have jurisdiction over written statement of particulars whereas the civil courts have jurisdiction over issues of confidentiality and, in most cases, disputes arising out of settlement agreements.

In relation to settlement agreements the proposal is that a confidentiality clause that does not meet the new wording requirements would be void in its entirety, meaning that an employee who breaches the confidentiality provisions of a settlement agreement could not be sued for doing so if the confidentiality provision was not drafted appropriately. The Government believes this should encourage employers to ensure they draft confidentiality clauses correctly and make clear to the worker the disclosure rights they retain even after signing a settlement agreement.

The Government has, however, rejected the Select Committee’s recommendation that it should become an offence to propose confidentiality clauses designed to prevent the disclosure of a protected disclosure or a criminal offence.

In relation to employment contracts, however, the Government does not propose that the confidentiality clause is void in its entirety. Instead it believes that a requirement to be clear on the limits of any confidentiality clause should be included in the written statement of particulars that must be given to all employees (to be extended to all workers from April 2020) and that the enforcement mechanism which already exists where an employer has failed to comply with the requirement to provide a compliant written statement would apply to any new requirement to include in the written statement a clear description of the limits of any confidentiality clause.

This would mean that when a worker brings a successful claim for an employment right to a tribunal, and can show that their employer failed to comply with the requirement to provide a compliant written statement, the worker would be entitled to additional compensation of between two and four weeks’ pay.

The consultation gives the example of an individual who successfully brings a case against their employer related to discrimination. During the tribunal hearing it is found that the written statement of employment particulars did not correctly include a clear explanation of the limits of the confidentiality clause in the employee’s contract and this would result in an increase in compensation.

The Government invites comments on its proposals in respect of enforcement in both cases and asks what would be the positive and negative consequences of its proposals.

Comment

Many employers have reacted to high profile media campaigns since the Harvey Weinstein revelations by promptly re-enforcing their sexual harassment and disciplinary and grievance policies. However, concerns over sexual misconduct in the work place, an environment in which there can be particular inequality of status and potential for abuse of power, have continued to be a focus of attention across many sectors, including education.

It is nonetheless significant that, of the various recommendations put to the Government in recent months as a mean of tackling sexual misconduct or harassment at work, including a proposed Code of Practice for employers, it is the use of non-disclosure or confidentiality clauses that the Government has chosen to address most urgently.

It seems inevitable that, in the short term, employers will, at the very least, need to ensure that contracts and settlement agreements include a clear statement regarding any confidentiality terms and their intended effect. However, with the close media attention this issue has attracted, there is much more to consider than legal compliance alone and the potential for reputational damage to individuals (accused and accuser) and their organisations can be immeasurable. It is therefore recommended that, even prior to Government intervention, institutions should now start to review their practices and procedures (if they have not already done so) and ensure that their use of confidentiality clauses is considered on a case by case basis and is not automatic.

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