Competing interests lead to more confusion concerning NDAs

On 21 July (oddly given that it was a Sunday) the Government announced what it described as “measures to prevent misuse of confidentiality clauses in situations of workplace harassment or discrimination. Frankly the press releases are light on detail. However, the four main changes are as follows:

  • Employers will have to make clear the limitations of a confidentiality clause, in plain English, within the settlement agreement and in the form of a written statement for the employee. In other words there will have to be a notice to the employee within the agreement which clearly explains what the clause does not cover.
  • Current legislation will be extended so that it will be a requirement for all individuals signing an NDA (whether or not contained within a settlement agreement) to obtain what is described as enhanced independent legal advice, presumably at the employer’s expense. This is potentially interesting because it raises the possibility that employees may need to obtain such advice at the commencement of or during employment, perhaps even before the commencement of employment. Much will depend on the definition of what constitutes a regulated NDA and that information, perhaps unsurprisingly, has not been published.
  • All NDAs must make clear that the restrictions will not prevent the employee from disclosing the otherwise protected information to the police, regulated care and health professionals, social workers and, interestingly, legal professionals. As matters stand, most settlement agreements include a confidentiality clause which provides that not only the terms but even the existence of the agreement must be kept confidential, save for immediate family members and relevant professional advisers (i.e. those advising the employee concerning the agreement).
  • Enforcement measures will introduced to deal with settlement agreements and written statements of employment particulars that do not comply with the regulations, including that non-compliant NDAs will be legally void.

What shall we do about NDAs?

Sir Philip Green

Non-disclosure agreements are nothing new. They were initially used in commercial transactions in order to protect parties in negotiations from the disclosure of commercially sensitive information. It remains the case that businesses which are considering mergers or acquisitions will normally start the process by requiring the interested parties to sign an agreement that is intended to ensure that, in the event that discussions do not lead to fruition, details of the parties, such as their business plans, forecasts and any other confidential arrangements, are not at risk of being leaked. This makes perfect sense, not least from the point of view of data protection.

Their use has become more widespread and they have moved into the sphere of employment law. It is more or less standard for settlement agreements (on the termination of employment) to include clauses which provide that the parties will keep confidential the terms of settlement and the circumstances giving rise to it. In most cases, this suits both parties. In effect, the employee is agreeing a trade off with the employer that, in return for a pay off which avoids the need for protracted, expensive and uncertain legal proceedings, they will accept an enhanced payment on terms which, to borrow a term from divorce law, provides for a clean break.

However, you can’t have missed the furore that has brought such agreements into the news headlines, particularly in the case of retail supremo Sir Philip Green and media mogul Harvey Weinstein. The #MeToo movement has led to a lively public debate about the inequality of arms which tends to accompany such deals and their ability to conceal serious wrongdoing including illegal activities, particularly discriminatory behaviour and, in the more severe cases, the sexual assault of women.

Defending an unfair dismissal claim which could have settled

News has emerged of a very costly outcome for the BBC following its failure to defend an unfair dismissal claim brought by former chief technology officer, John Linwood. Mr Linwood was dismissed in 2013 following the disastrous failure of the Corporation’s Digital Media Initiative. Launched in 2008 it was intended to modernise production and output…

Government launches consultation on simplification of tax treatment of termination payments

One of the most contentious areas in the field of employment law concerns the tax treatment of settlement payments on the termination of employment. In the 20 years plus that I have been dealing with employment law matters the law in this area has never been entirely settled and there has been a long series…

cases proving costly to the public purse

On 22 July news emerged via BBC Newsnight that Haringey Council accounts show that a payment of £679,452 was made to Sharon Shoesmith. 1) Haringey council accounts are out showing £679,452 settlement w Sharon Shoesmith, first revealed in Oct on #newsnight with @jakemorristw — Allegra Stratton (@BBCAllegra) July 22, 2014 The breakdown reveals salary and…