Non Disclosure Agreements – ending abuse of the confidentiality clause?

A Non Disclosure Agreement (“NDA”) or a confidentiality clause may be used by an employer to prevent an employee from disclosing information.  Amid growing controversy in the use of NDAs in cases of criminal activity, sexual harassment, discrimination and whistleblowing, ACAS recently issued new guidance in the fair and proper use of such a document.  This forms part of the Government’s response to the use of NDAs by businesses in discrimination cases.

The NDA is a written agreement contained within the employment contract, an ACAS settlement form following conciliation (COT3) or in a settlement and may be issued at any stage of the employment.

NDAs are useful in the protection of company secrets or to maintain confidentiality in the event of a dispute; however reform was required as NDAs were increasingly being used inappropriately to cover up HR issues that should have been dealt with using disciplinary or grievance procedures.  If senior managers were appointed to oversee anti-discrimination policies and equality law, this would have protected against the requirement to employ last ditch efforts to sweep a serious issue under the carpet; inappropriate use of NDAs typically follow management failings.  Misuse of confidentiality clauses may be extremely damaging for the culture of a business, creating distrust, making employees fearful of speaking up about issues or unsure that they will be heard and any problems addressed.

When using NDAs legitimately, an employer should make it clear in plain English the limitations of any confidentiality clause so that an individual fully understands what they are signing, as well as ensuring that an employee has access to independent legal advice.  It should also be crystal clear that information may still be disclosed to police, health professionals or legal professionals.  The new guidance provided could be challenged as quite vague on this; ‘clarity’ may be interpreted as concise and to the point, however many settlement agreements still run into a considerable numbers of pages.  It will be interesting if codifying of the guidance may progress further into some standardisation of terms and conditions, although such an idea has been previously considered and rejected by the Employment Lawyers’ Association and Law Society Employment Committee.

Two years on from the #metoo campaign, it is certainly the end of the road for ‘gagging’ clauses, where there is no excuse for the use of improper NDAs going forward; it is also pleasing that ACAS expand the directions to cover all protected characteristics contained within the Equality Act.  The guidance should also serve as a reminder for employers to review and update any policies and procedures encompassing bullying, harassment and victimisation while taking a proactive management approach to equality and fairness in the workplace.  A review of any existing NDAs may be useful as protection may already be afforded following the development of GDPR legislation.

Nevertheless, the NDA still remains a crucial tool in protecting customer or client information and confidentiality in the workplace or in disputes. Used properly they can afford protection for the employer while delivering clear expectations for the employee.