New Guidance on the Use of Confidentiality Agreements

This OnPoint reports on the guidance recently issued by the Equality and Human Rights Commission (EHRC) on the use of confidentiality agreements. Whilst it does not have statutory force, the EHRC guidance provides further useful pointers for employers to consider when navigating this topical and controversial area.

As we reported in a recent OnPoint, NDA and Confidentiality Provisions, the use by employers of confidentiality provisions and non-disclosure agreements (“NDAs”) – also referred to more colloquially as “gagging clauses” – and their detailed provisions, has come under increasing scrutiny, particularly in relation to sexual harassment allegations. 

On 17 October 2019, the EHRC published new guidance on the use of confidentiality agreements in discrimination cases. This guidance does not have statutory force and therefore employment tribunals are not required to take it into account, However, it is of value to employers in outlining the EHRC’s view of good practice in this context and in identifying areas where challenges may arise relating to their approach to the handling of the confidentiality aspects of the resolution of difficult employment situations.

In setting out this guidance the EHRC seeks to promote cultural change that enables workers to feel able to discuss their experiences and expose sexual harassment and other forms of discrimination. The EHRC recognises that NDAs can be legitimate where confidential information is to be protected or an individual wishes to ensure confidentiality as to the discrimination to which the individual has been subjected. Nonetheless, it does consider, in the context of the #MeToo movement, that NDAs form “part of the problem”, particularly where they have been used to cover up the worst instances of discrimination.

The guidance provides numerous good practice recommendations and some specific points to note are follows:

• Induction processes should make clear how discrimination should be reported and that complaints will be taken seriously.

• Whether settlement agreements should include confidentiality provisions should be considered on a case by case basis and such provisions should only be used as required. Examples of where confidentiality agreements could be appropriate include where the victim of discrimination seeks confidentiality and where, after a full investigation and hearing, the worker’s allegations have been found to be false. In weighing in the balance whether or not to include confidentiality provisions in a settlement agreement, employers should consider the reason for and benefit of a confidentiality agreement as well as its impact on the worker in question and the culture of the organisation. The suggestion in effect that confidentiality provisions should not always be applied does not reflect the general approach of employers in the private sector.

• The rationale for confidentiality should be shared with the worker so that the individual can consider its reasonableness with his or her adviser. Positively explaining the rationale for confidentiality when proposing a settlement agreement is not currently a common approach, not least as the worker’s adviser’s role is usually expected to include consideration of the confidentiality aspects of the agreement with the individual as part of the process of advising on the terms and effect of the agreement.

• The wording of confidentiality provisions should be carefully considered to make clear what a worker can and cannot discuss and to ensure that the agreement does not stop the worker from speaking about any discrimination and is limited to what is necessary and appropriate in the circumstances. Confidentiality provisions should normally be mutually applicable to both parties.

• The guidance reminds employers that confidentiality agreements cannot prevent workers from making protected disclosures – whistleblowing – when protected in doing so by the whistleblowing legislation. It also makes clear that to use a confidentiality provision to seek to prevent a worker from speaking to the police could constitute a criminal offence such as attempting to pervert the course of justice or preventing the apprehension or prosecution of an offender. As is consistent with existing guidance from the Solicitors Regulation Authority and the Law Society, confidentiality agreements should not prohibit whistleblowing or compliance with any regulatory or legal duty and should permit discussions with appropriate third parties such as regulators, medical professionals and counsellors, the police, HMRC, immediate family members, the individual’s trade union and, to the extent necessary to address the reasons for leaving employment, a future employer. The employer should not delegate responsibility for the drafting of the agreement entirely to its lawyers.

• The guidance indicates that confidentiality agreements should not include warranties from the worker in question that the individual is not aware of any criminal offence or protected disclosure relating to the employer on the basis that this would potentially have the same “silencing effect” as a confidentiality provision.

• Workers should be allowed the opportunity to take advice on a proposed settlement agreement and the employer should meet the reasonable costs of that advice, the amount of which will vary depending on the circumstances but should be discussed with the worker’s adviser. The EHRC considers, in contrast to most current practice, that the worker’s costs should be met even if agreement is not reached.

• The worker should be given a reasonable period of time – which should be no less than 10 days other than in exceptional circumstances – to consider a proposed confidentiality agreement. This is consistent with the recommendations of the Acas Code of Practice on Settlement Agreements on the time individuals should be given to consider severance proposals raised in a “protected conversation.” Workers should not be put under pressure to sign confidentiality agreements, and should always be given a copy of the agreement for their records. 

• Confidentiality agreements should be signed off by a director or appropriate delegated senior manager who was not involved in the relevant issue or the consideration of any grievance relating to it.

• Even if a claim has been settled employers should, where it is possible and reasonable to do so, investigate the issues in question in order to address any discrimination and take reasonable steps to prevent it occurring in the future. This recommendation is not limited to regulated environments where the employer may be obliged in any event to investigate issues raised by a worker even if the individual’s claim is settled. The guidance indicates that, where the employer fails to investigate allegations and a similar incident occurs subsequently, the employer will be prejudiced in the latter case in seeking to avoid liability for the employee’s discriminatory acts on the basis of the “statutory defence” that it took all reasonable steps to prevent discrimination.

• Employers should monitor their use of confidentiality agreements. Larger employers with multiple sites should, subject always to appropriate data protection compliance, maintain a central record covering issues such as, for example, when confidentiality agreements have been used, in respect of what type of claim, who allegations of discrimination were made against, what type of confidentiality was agreed and why confidentiality was applied. The employer’s board of directors or equivalent should have oversight of this central record.

• Managers should be required to escalate concerns about workplace culture systemic discrimination or repeated or "highly serious" acts of discrimination by one individual.

Whilst several aspects of the EHRC guidance represents its view of best practice rather than requirements for the enforceability of confidentiality provisions, employers will wish to consider whether – and to what extent – to adopt internal policies and procedures reflecting its recommendations, mindful of the risk of reputational and potential legal challenges if their approach conflicts with the guidance.

Employers will also wish to keep an eye out for any further regulatory guidance for their lawyers issued in due course by the Solicitors Regulation Authority, advice issued by the Law Society and any legislation that may be forthcoming in due course as a result of the government’s recent consultation on the use and abuse of NDAs and options for their regulation.