When is a non-disclosure agreement appropriate?

The use of non-disclosure agreements, particularly in the context of allegations of sexual harassment, has been in the public spotlight recently. In an employment relationship, non-disclosure agreements, or confidentiality clauses, are often seen when disputes between employers and employees are being settled. Settlement agreements or COT3 agreements (reached with the assistance of ACAS) will often include an obligation on both sides to keep the terms of the agreement, and sometimes the existence of the agreement, confidential.

ACAS has recently issued new guidance on the use of non-disclosure agreements. The guidance states that it aims to help employers and workers to understand what non-disclosure agreements are; when they might be used appropriately; when they might be inappropriate; and how to improve workplace practises so that they are never entered into as a matter of routine.

The guidance is relevant to any type of case, but particularly mentions agreements in the context of allegations of workplace harassment. It includes advice that confidentiality clauses should not be used:

as a matter of routine;
to cover up inappropriate behaviour or wrongdoing, particularly where there is a risk of repetition of such behaviour;
to try to stop someone from reporting discrimination, harassment or sexual harassment; or
before alternative options have been explored.

There is also a reminder that confidentiality clauses must not attempt to stop an individual from whistleblowing; or to avoid a legal requirement to make a referral to a regulatory body, government agency or the police.

ACAS gives examples of circumstances where it considers it may be inappropriate and/or unlawful to use confidentiality clauses, including when:

agreements are used to cover up or deter workers from reporting matters including any form of discrimination, harassment, sexual harassment or whistleblowing;
a confidentiality clause is used as a matter of routine, leading to a culture which lacks openness and where workers do not feel confident that their complaints will be taken seriously or lead to workplace improvements; or
trying to hide an issue in this way makes it less likely an employer will address any underlying issues that could cause further problems.

Comment

The ACAS guidance is not statutory, and it is not the first guidance to be issued on the use of non-disclosure agreements. As we reported last month, the Equality and Human Rights Commission has also published guidance on sexual harassment and other forms of harassment at work. That guidance reminds employers that a culture of transparency should be promoted, where workers feel empowered to speak up about discrimination; and that confidentiality agreements must only be used where it is lawful to do so.

The Law Society has also issued guidance for workers on the use of non-disclosure agreements. It advises workers to get independent legal advice before signing a confidentiality agreement and reiterates that it is important for workers to understand when signing a confidentiality agreement who they can talk to, whether there are any time limits on the confidentiality and how they can talk about their role in future job interviews. The guidance reminds workers that a confidentiality agreement cannot lawfully restrict them from talking to the police or a regulator; and cannot be used to stop whistleblowing.

In addition, the Solicitors Regulatory Authority (SRA) has issued a warning notice on the use of non-disclosure agreements. It reminds solicitors that although the use of non-disclosure agreements is not prohibited, they must not state, or give the impression, that an individual would be prevented by the agreement from reporting a breach of regulatory requirements; making a whistleblowing disclosure; reporting an offence to a law enforcement agency or cooperating with a criminal investigation. In addition, a non-disclosure agreement should not be used as a means of improperly threatening litigation against or otherwise seeking to improperly influence an individual to prevent or deter such a disclosure. Non-disclosure agreements must also not include clauses known to be unenforceable.

The Government has expressed its intention to legislate on the use of non-disclosure agreements. However, it is not currently known when such legislation will be brought forward.

20 February 2020

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