The Court of Appeal ordered an injunction to prevent the Telegraph newspaper publishing allegations of "discreditable conduct" by a senior executive of a group of companies against five employees of those companies.

The injunction was on an interim basis pending a speedy trial, given that publication of the allegations was a matter of public interest.  Subsequent to the Court's decision, Lord Peter Hain named the senior executive concerned in the House of Lords relying on Parliamentary privilege (ABC & Others v Telegraph Media Group Limited). 

Background law

A settlement agreement is a legally binding agreement between an employer and an employee (or worker, former employee or former worker), in which the employee waives their right to make specified claims and, if relevant, withdraws any current claim against the employer, generally in exchange for one or more payments. 

Section 43J of the Employment Rights Act 1996 expressly provides that any provision in a settlement agreement which seeks to preclude the making a protected disclosure will be void.  

Facts

In this case the Claimants (being two companies in the same group and a senior executive of that group), sought an injunction to prevent the Telegraph newspaper from publishing information about them, which they argued had been provided to the newspaper in breach of confidence.  

That argument was made because the information provided to the Telegraph concerned allegations of "discreditable conduct" by the executive, which had been the subject of settlement agreements entered into by five employees of the group companies under which substantial payments had been made to them.  

Although the settlement agreements contained provisions requiring the employees to keep the alleged misconduct confidential, the relevant clauses did protect the employees' right to make legitimate disclosures (including reporting any criminal offences) if they decided to do so.  In other words, the NDA did not attempt to restrict the individuals from blowing the whistle.

Decision 

The Court of Appeal overturned the decision of the High Court, finding in favour of the Claimants and granting an interim injunction against the publication of the allegations.  The Court of Appeal stated that there was: "…a real prospect that publication by the Telegraph will cause immediate, substantial and possibly irreversible harm to all of the Claimants".  This needed to be balanced against the public interest in the allegations.  

Although the granting of an interim injunction had the undesirable consequence of delaying the publication of matters of public interest, this was mitigated by the order of a speedy trial.

When can employers use NDAs in settlement agreements?

It is common practice for settlement agreements to require the employee to maintain confidentiality in relation to the agreement, including the reasons the agreement was entered into – these provisions are sometimes referred to as the non-disclosure agreement (NDA).  Whilst NDAs are permissible, employers must be careful not to "gag" a worker by purporting to prevent them blowing the whistle.  As set out above, section 43J of the Employment Rights Act 1996 means that any provision in an agreement which seeks to preclude a worker from making a protected disclosure will be void.  This means that carve outs for protected disclosures are typically included in settlement agreements – as they were in this case.

This proper use of NDAs has also been addressed by the Solicitors Regulation Authority (SRA), in their Warning Notice on the use of NDAs.  In particular, the notice stated that NDAs should not be used:

• as a means of preventing, or seeking to impede or deter, a person from:
  • reporting misconduct, or a serious breach of our regulatory requirements to us, or making an equivalent report to any other body responsible for supervising or regulating the matters in question;
  • making a protected disclosure under the Public Interest Disclosure Act 1998;
  • reporting an offence to a law enforcement agency; or
  • co-operating with a criminal investigation or prosecution.
• to influence the substance of such a report, disclosure or co-operation.
• as a means of improperly threatening litigation against, or otherwise seeking improperly to influence, an individual in order to prevent or deter or influence a proper disclosure.
• to prevent someone who has entered into an NDA from keeping or receiving a copy.

Potential reform

The Women and Equalities Committee conducted a six-month enquiry into sexual harassment in the workplace, which they described in their report as "widespread and commonplace".  As part of its five-point plan to tackle this matter, the Committee recommended that the Government clean up the use of NDAs to ensure that they are not used unethically in cases where sexual harassment is alleged.  They recommended that:

• The Government introduce statutory confidentiality wording using plain English wording setting out the meaning, effect and limits of confidentiality clauses, including a clear explanation of what disclosures are protected under whistleblowing laws and cannot be prohibited or restricted.
• The definition of protected disclosures be widened to include disclosures of sexual harassment to the police and all regulators, including the EHRC and Health and Safety Executive, and to any court or tribunal.
• It should be an offence for an employer or their professional adviser to propose a confidentiality clause designed or intended to prevent or limit the making of a protected disclosure or disclosure of a criminal offence.
• Use of provisions in confidentiality agreements that can reasonably be regarded as potentially unenforceable should be clearly understood to be a professional disciplinary offence for lawyers advising on such agreements (NB. this point has been addressed by the SRA by virtue of their Warning Notice – see above). 

At the end of October, the Government announced its intention to bring forward a consultation on the use of NDAs in employment disputes with the aim of improving the legislation on this area to: "…make it absolutely explicit to employees when a non-disclosure agreement does not apply and cannot be enforced".  Maria Miller MP, Chair of the Women and Equalities Committee, welcomed the commitment, adding she would like to see NDAs outlawed altogether in the employment context.

Comment

Employers should be extremely careful about how NDAs are used in settlement agreements, particularly where sexual misconduct is alleged, and even more so where that conduct is alleged to have been committed by a senior employee against a junior employee.  Even where the guidelines set out above are followed, use of NDAs in relation to such cases can lead to widespread press attention since the #MeToo movement, as demonstrated by the current case.

Employers should also consider responding to the consultation on the use of NDAs in the employment context once it is published.

ABC & Others v Telegraph Media Group Limited