EHRC issues new guidance on appropriate use of NDAs

The new guidance has been produced at the request of the government as part of its wider work on NDAs. It does not itself have legal force, but rather sets out the law on NDAs including the circumstances in which an NDA will not be enforceable. It also provides examples for employers of good practice in relation to NDAs.

The government announced in July its intention to legislate to ban employers from using NDAs to prevent disclosures to the police, regulated health and care professionals and legal professionals. It will also legislate to require employers to clearly disclose the limitations imposed by an NDA in the employment contract or settlement agreement in which it appears

Employment law expert Susannah Donaldson of Pinsent Masons, the law firm behind Out-Law.com, said that the EHRC's recommendations were "robust".

"Whilst the guidance does not have the status of a statutory code, it can still be used as evidence in hearings if relevant," she said. "As such, HR professionals and in-house lawyers should familiarise themselves with the guidance and conduct a review of their existing precedents and practices."

The guidance covers the use of any form of agreement or contract in the context of claim for discrimination, harassment and victimisation in which it is agreed that certain types of information will not be discussed or passed on. It covers a broad range of workers, including agency workers and job applicants, in England, Scotland and Wales.

The EHRC recognises that NDAs can have legitimate uses in the context of a discrimination claim, including where the worker wants to keep a complaint private. Its guidance is intended to prevent the inappropriate use of NDAs, which has the potential to discourage workers from speaking up and having a 'chilling' effect within organisations.

The guidance sets out the circumstances in which an NDA will be unenforceable, such as where a worker is under duress to sign or the agreement includes a penalty clause. NDAs which seek to prevent lawful whistleblowing, reporting of criminal offences, cooperating with criminal investigations or making other disclosures required by law or regulatory duty are also unenforceable.

According to the guidance, the use of confidentiality clauses has become "commonplace" in both contracts of employment and settlement agreements. The EHRC is of the view that these clauses will be neither appropriate nor necessary in "most cases" involving discrimination. Employers should therefore avoid incorporating confidentiality clauses into their agreements as a matter of course and should avoid the use of standard wording where the use of a confidentiality clause is justified.

The guidance gives examples of some scenarios involving discrimination, victimisation or harassment in which a confidentiality clause may be appropriate. These include at the request of the worker, to protect a witness, to protect a worker who has been falsely accused and to avoid an investigation or tribunal proceedings from being prejudiced.

Confidentiality clauses or agreements should be clearly drafted and properly explained to the worker before signing. They should also list the people or organisations, beyond those required by law, with whom the worker may discuss the issues covered by the agreement, such as a trade union or immediate family members.

Workers should be given a reasonable amount of time to consider the terms and to take independent advice before signing an NDA. The guidance recommends no less than 10 days in the context of settlement agreements, other than in exceptional circumstances. The employer should pay the worker's reasonable costs to receive independent advice, including in circumstances where the worker reasonably decides not to sign the agreement and should not dictate from whom the worker seeks independent advice.

Employers should keep a central register of any confidentiality agreements which must comply with data protection legislation (GDPR). Each agreement should be signed off by a director or equivalent of the employer, and the board of directors or equivalent should have oversight of the register.

Susannah Donaldson said: "By cautioning against the blanket use of confidentiality clauses in settlement agreements involving discrimination disputes, calling on employers to conduct a risks/benefits assessment on a case by case basis and recommending the use of tailored wording rather than standard clauses, the guidance should help to clamp down on the irresponsible use of confidentiality clauses".

"The recommendation that employers keep a central record of confidentiality agreements, overseen by the board, to identify systemic issues and to prevent the misuse of such agreements should also introduce greater transparency and accountability," she said.