Concerns about the misuse of non-disclosure agreements ("NDAs") have been long-standing in Britain, with the #MeToo movement having drawn particular attention to the issue. Regulation of the use of NDAs seemed to be a notable omission from the Employment Rights Bill ("the Bill"). However, shortly before the parliamentary summer recess, a whole new section on NDAs was introduced to the Bill, banning their use in relation to harassment and discrimination.
What has been proposed?
If passed, the amendment to the Bill will prohibit employers from using an NDA to prevent an employee or worker from making any allegation of, or disclosure of, information relating to any "relevant harassment or discrimination". Its reach is broad, with the drafting covering current and former employees and workers, and it may be extended further (for example, to contractors) via secondary legislation. The harassment or discrimination is "relevant" if it is carried out by the employer or a colleague, and the victim must be either the worker or a colleague.
It is not only NDAs relating to sexual harassment or discrimination that are included. NDAs relating to nearly all types of statutory discrimination and harassment in employment will be void. Only victimisation, failures to make reasonable adjustments, and third-party harassment will not be covered. It may be that further amendments are made prior to the Bill passing to rectify some or all of these omissions, as it is not clear whether they were intended.
Exceptions
The ban will not apply to "excepted agreements". It is not yet clear exactly what that means, but the amendment to the Bill confirms an excepted agreement must satisfy any conditions set out by the Secretary of State in regulations. In Ireland, where similar provisions came into force recently, an excepted non-disclosure agreement is one where the employee requests to enter into it, and the employee receives written independent legal advice prior to entering into it. There are also a number of other conditions that apply, including that the agreement must be in writing, be easily understood, and be accessible by the parties to the agreement. The employee also has the right to withdraw from the agreement without penalty within 14 days of entering into it.
What other controls on the use of NDAs are in place?
In the immediate aftermath of the #MeToo movement in 2018, and in consequence of evidence heard by the Women and Equalities Committee, the Solicitors Regulation Authority ("SRA"), which regulates solicitors in England and Wales, published a Warning Notice on the use of non-disclosure agreements. The SRA was concerned that NDAs were being used to prevent the reporting of crimes or regulatory misconduct. The Notice sets out the SRA's expectations and regulatory requirements for anyone involved in drafting, negotiating, advising on or using an NDA. Most recently, the Warning Notice was updated to, among other things, remind solicitors that consideration should be given to whether an NDA is needed, and that they "should not be used routinely".
Whistleblowing laws also already mean that any NDA that attempts to prevent an individual from making a protected disclosure will be void. On 1 August, legislation came into force that prevents English higher education providers, including universities, from entering into NDAs with staff, students or visiting speakers in relation to sexual abuse, harassment or misconduct, as well as other types of harassment and bullying. In October, the Victims and Prisoners Act 2024 will make NDAs unenforceable against victims of crime in relation to disclosures of information to a specified list of people and organisations including the police, a victim’s immediate family, and victim support services.
Impact
NDAs may be stand-alone contractual agreements, or clauses within larger agreements including contracts of employment and settlement agreements. For employers, the biggest impact of these provisions is likely to be on their use in settlement agreements. Currently, employers may be willing to consider economic settlements (where the employer believes they have good prospects of defending a claim, but it is more economical to settle than defend it at tribunal) on the basis that the parties would be bound by confidentiality provisions contained in a settlement agreement. If that is no longer possible, we may see more cases being defended, with the knock-on effect of increasing the employment tribunal workload and (in some parts of the country) backlog. Businesses will, however, still remain free to use NDAs to protect sensitive business and commercial information, and to protect trade secrets and other confidential data.
