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Out-Law News 2 min. read

UK to prevent misuse of non-disclosure agreements by employers

The UK government has announced new legislation which will stop employers using confidentiality clauses, also known as non-disclosure agreements (NDAs), to prevent individuals from disclosing information to the police, regulated health and care professionals or legal professionals.

The decision follows a consultation into the proposals (28 page / 639KB PDF). While the government acknowledged there was a legitimate place for the use of confidentiality clauses signed as part of an employment contract or in a settlement agreement, it said they should not be used to intimidate victims of harassment and discrimination.

The legislation will mean that confidentiality clauses cannot be used by employers to prevent individuals from going to the police, doctors or lawyers with concerns over issues such as discrimination or sexual harassment. Legislation will also be introduced to make sure that NDAs’ limitations are clear to those signing them, and to improve the independent legal advice available to employees when signing settlement agreements at the end of employment.

The government also said it would produce guidance on drafting requirements for confidentiality clauses, and introduce new enforcement measures for confidentiality clauses that do not comply with legal requirements. These will include additional compensation for some individuals whose confidentiality clauses in written statements do not meet new drafting requirements, if the case is brought before an employment tribunal.

Employment law expert Helen Corden of Pinsent Masons, the law firm behind Out-Law, said businesses should take action in response to the news.

“Whilst there is no indication of when the new legislation may come into force, employers should be reviewing the terms of confidentiality clauses in contracts of employment and settlement agreements now in order to determine whether any changes will be needed,” Corden said. 

Corden said employers should pay particular attention to existing confidentiality clauses to determine whether they prevent, or could be perceived to prevent, an individual disclosing information to the police, regulated health and care professionals or legal providers.

“The government has indicated that it will legislate to require confidentiality clauses to clearly set out their limitations. This will significantly benefit individuals who are often left unclear about what they can and cannot disclose and to whom,” Corden said. 

“Extending the existing legislation to ensure that individuals receive advice not only on the nature of the confidentiality requirement but also on the limitations of confidentiality clauses will also assist in this regard,” Corden said.

The consultation proposed introducing a duty for employers to report on the number of settlement agreements containing NDAs and similar clauses which they had agreed on, as well as the number and type of discrimination and harassment claims they had received.

However following discussions during the consultation process, the government said it was not pursuing any such requirements as the reporting burden would be too great and may not necessarily provide meaningful information.

“Instead, the government has stated that efforts should focus on preventing sexual harassment and discrimination in the first place. It has therefore launched a consultation in this regard,” Corden said.

That consultation on sexual harassment in the workplace was launched in early July and closes on 2 October.

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