The Equality and Human Rights Commission (EHRC) recently published new guidance on the use of confidentiality agreements in discrimination, harassment and victimisation cases. This guidance covers both legal obligations and suggested good practice.

Background

Confidentiality clauses or non-disclosure agreements (NDAs) have become a topic of significant interest because of how they can be used to prevent employees from reporting allegations of sexual harassment or other similar misconduct.

The government recently published its response to a consultation on the regulation of confidentiality clauses, which sets out a number of proposals for new legislation in this area (for further details please see "Response published to consultation on misuse of confidentiality clauses").

This consultation took place against the background of various other interventions and proposals in this area, including an EHRC report on sexual harassment at work and a Women and Equalities Committee report on sexual harassment in the workplace, which called for NDAs to be better controlled and regulated (for further details please see "Workplace sexual harassment – Women and Equalities Committee urges radical reform"). In addition, the EHRC is expected to publish wider guidance on tackling sexual harassment later in 2019.

EHRC guidance

The new EHRC guidance provides a significant steer on both the current law and good practice for both employers and workers. The introduction clarifies that it is concerned only with confidentiality agreements that could prevent a worker from speaking about any act of discrimination, harassment or victimisation which contravenes the Equality Act.

Confidentiality agreements in terms and conditions of employment

The guidance recognises that employers can legitimately seek to stop a worker discussing or using confidential information outside of work, either during their employment or after their employment has ended. However, there are legal limits on this. The good practice guidance is as follows:

  • The wording of a confidentiality agreement should make clear what the worker can or cannot do and that the agreement does not stop them from speaking about any form of discrimination. The guidance suggests that employers should include a definition of what they consider to be 'confidential information', and that their policies should clarify how workers can report discrimination and that reports will be taken seriously.
  • Employers should not pressure workers to sign a confidentiality agreement and should allow them time to consider it and discuss it with an adviser.
  • Employers should give workers a copy of their signed confidentiality agreement to keep for their records.

Resolving disputes with workers

Confidentiality agreements which stop workers discussing acts of discrimination are commonly included in settlement agreements and Advisory, Conciliation and Arbitration Service conciliated agreements. This will be unlawful in some cases, but in any event the EHRC's good practice guidance is as follows:

  • Employers should consider the need for a confidentiality agreement on a case-by-case basis and not include it as standard in a template settlement agreement. Confidentiality agreements will not be necessary or appropriate in most cases. Examples of when they may be needed include:
    • where the worker wants to use one;
    • where a victim or witness wants one;
    • in rare cases where a worker has falsely accused someone of discrimination; or
    • where an employer has a legitimate interest, such as maintaining confidentiality during an investigation.
  • In every case, employers should weigh up:
    • whether there is a clear reason for needing the agreement;
    • the benefit to the employer;
    • the impact on the worker and the culture of the organisation; and
    • the benefit of not using one.
  • Agreements should be worded so that they deal with the particular circumstances of the case and the employer's main concern – for example, by preventing disclosure of how much compensation was paid rather than preventing all of the discussion about the discrimination.
  • Employers should inform workers why a confidentiality clause must be used so that they can consider with their independent adviser whether this is reasonable.
  • Employers should ensure that the wording allows the worker to have discussions with specific people and organisations – including regulators, police, professionals bound by duties of confidentiality, immediate family, trade unions and future employers (to the extent necessary to discuss how previous employment ended).
  • Obligations should normally be two-way so that if a worker is required not to discuss a specific issue, the same applies to the employer.
  • Workers should be given a reasonable period to seek independent advice – normally at least 10 days – and pay a sufficient costs contribution to allow them to both obtain advice on the agreement and seek changes if necessary. Employers should also seek legal advice, but not delegate all responsibility for drafting and negotiation to their lawyers.
  • Employers should monitor the use of confidentiality agreements. Larger employers or those with a significant number of agreements should keep a central record to help monitor potential systemic discrimination issues. The use of confidential agreements should be signed off by a director or an appropriate delegated senior manager and, where reasonably possible, by someone who was not involved in the act of discrimination or in hearing any grievance relating thereto.

Unlawful confidentiality agreements

The guidance also covers the types of confidentiality agreement which cannot be enforced. These include those which prevent protected disclosures under whistleblowing laws, the discussion of criminal activity or activities required by law, such as giving evidence or making a report to a regulator. According to the good practice guidance, it should be clear to a worker from a settlement agreement's wording that it does not stop them from doing these things.

Implications

It is surprising that the EHRC has chosen to publish this guidance now, with draft legislation to implement the government's recent proposals forthcoming. The guidance covers only the current law, so will be out of date as soon as any new laws are published on matters such as to whom disclosures can be made and what wording must be included in confidentiality clauses.

This document is nonetheless likely to have a significant effect on discussions between employers and workers about confidentiality agreements, particularly as part of a settlement agreement. Much of the EHRC's good practice guidance goes further than the law requires but can still be used in negotiations between parties.

Overall, the guidance takes the approach that the use of NDAs when resolving disputes should be the exception rather than the norm, with workers being given both time and money to consider whether they are willing to agree. This is quite a shift from the current practice of many employers that present settlement agreements with a standard, template confidentiality clause – often required to be signed within a short timeframe – and make a minimal contribution towards legal fees.

The good practice guidance is not legally binding but will undoubtedly be used by workers and their advisers to question the use of broad confidentiality clauses in agreements that settle discrimination claims. It remains to be seen how this will intersect with any forthcoming legislation.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.