Confidentiality and non-disclosure agreements: developments in the wake of the #MeToo Movement
Confidentiality agreements, or non-disclosure agreements (NDAs), are frequently used in Settlement Agreements when a deal is done to settle any potential employment claims, including sexual harassment. The #MeToo movement gained traction following high profile allegations made against Harvey Weinstein and Philip Green last year, seeing an increasing number of women disclosing their own experiences of sexual harassment in the workplace on social media using the hash-tag ‘MeToo’. The movement is now a widespread phenomenon.
Such allegations shone the spotlight on NDAs being used to silence victims, concealing allegations of wrongdoing; NDAs often prevent the claimant from discussing the existence of the settlement and the circumstances which gave rise to it, including sometimes very extreme sexual harassment. In consequence, the Solicitors Regulation Authority has issued a Warning Notice about their use; the UK government has pledged to put a stop to the “unethical use” of NDAs; and in January this year the Law Society published a practice note on the use of NDAs and confidentiality clauses in an employment law context.
The debate is ongoing, and institutions such as the House of Commons Women and Equalities Select Committee, the Department for Business, Energy and Industrial Strategy (BEIS) and Acas have highlighted this to be one of their key priorities this year. The question of what employers and legal advisers should be doing and what the future of confidentiality agreements will entail remains.
Government inquiry: Sexual harassment in the workplace
The Law Society’s guidance sets out the following points for employers to consider:
- The extent of the NDA – it must not prevent employees from making certain disclosures to the authorities.
- A limit on any restrictions – where any exceptions are subject to some form of restriction, any limits imposed must be very carefully considered.
- Easily understood by all parties – an NDA must be drafted in clear simple English and it is good practice to give anyone signing a confidentiality clause time to consider the implications and take legal advice.
However, in a report published in June, MPs state that “allegations of unlawful discrimination and harassment in the workplace are routinely covered up by employers with legally drafted non-disclosure agreements” and request more to be done by regulators and specifically implores the Law Society’s efforts to be revisited.
The Women and Equalities Select Committee have communicated with the government and agree that there needs to be a statutory code of practice to help employers understand the steps they must take to ensure they are preventing sexual harassment at work. It is thought that the Committee will be working with the Equality and Human Rights Commission and Acas to put together the statutory code of practice, which should provide consistency in approach.
Regulators are specifically concerned with the frequent use of NDAs to have a deterrent effect on the making of disclosures, as well as those which are drafted widely to create significant uncertainty and seeking to exclude future claims. There is also attention being given to additional ‘standard’ clauses such as claw-back provisions which see the victim having to repay any compensation received in the event she breaches the terms of the NDA, usually the confidentiality provisions.
The future for confidentiality agreements
Confidentiality provisions can often provide benefits for both the employee and employer, as highlighted by evidence given to the Women and Equalities Select Committee earlier this year. For example, a victim may decide that signing an NDA is in their best interest; they may seek a less stressful alternative to court procedures or value guaranteed privacy – especially useful for individuals in the public eye. It is for this reason that a complete ban seems unlikely.
Instead, regulators are working towards a solution to ensure confidentiality provisions do not prevent proper recording of workplace sexual misconduct. How this is to be achieved is uncertain. Two potential changes have been discussed: standard settlement agreement wording; and annexing written guidance to settlement agreements.
The first proposed approach of formulating a standard wording raises concerns that such rigidity will lead to problems with reaching a settlement. There are further concerns regarding how standardised settlement agreements can keep pace with legal developments. Indeed, the BEIS consultation indicates the government is unlikely to introduce this.
Alternatively, to annex written guidance to settlement agreements may encourage a clearer, well explained agreement which does not overstep.
It is evident that developments will see a greater onus being put on legal advisers to carefully consider the restrictions on making disclosures.
Overall, it seems confidentiality clauses widely drafted or those used for deterrent effect may now be deemed unacceptable.
What should our clients be doing now?
With the spotlight on confidentiality clauses in settlement agreements, employers should review provisions in their agreements, such as claw back provisions or indemnity clauses, to ensure they do not act as an NDA, preventing disclosures that would otherwise be permitted.
To keep pace with legal developments, employers should watch out for the government’s proposed issuing of a new statutory Code of Practice on Sexual Harassment and any further guidance.