The Government has confirmed that it will legislate to ensure that there are clear limitations to confidentiality clauses which are easily understandable by those who sign them and that individuals receive independent legal advice on the extent of a confidentiality clause when they sign a settlement agreement. New drafting guidance will be provided and enforcement measures introduced for clauses that do not comply. (Response to consultation on proposals to prevent misuse in situations of workplace harassment or discrimination)
In March 2019, the government launched a consultation (see our previous article here) to seek evidence and views of the use of confidentiality clauses in the employment context, consult on a number of proposals to limit the misuse of confidentiality clauses and to enhance clarity for individuals on what they should and should not cover.
The consultation arose after a number of cases came to light where employers had used confidentiality clauses to prevent victims of workplace harassment or discrimination from speaking out. Whilst the Consultation noted that confidentiality clauses have a right and proper place in the employment context (both during employment for the protection of trade secrets and confidential information and in settlement agreements to allow parties to an employment dispute to move on), the government wanted to seek views on what reasonable limitations might be put on confidentiality clauses to ensure they are not misused in cases of harassment and discrimination.
The government has confirmed that the reforms outlined in the response to this consultation are part of a wider response to sexual harassment in the workplace. On 11 June 2019, WESC published their report on the use of non-disclosure agreements in discrimination cases, which the government has confirmed it will respond to separately. On 11 July 2019, the Government Equalities Office launched a consultation on sexual harassment in the workplace, focusing on steps to tackling inappropriate workplace culture. This consultation closes on 2 October 2019.
Now, in response to their consultation to tackle misuse of confidentiality clauses, the government has confirmed that it will:
- Legislate to ensure that a confidentiality clause cannot prevent an individual disclosing to the police, regulated health and care professionals or legal professionals and that the limitations of a confidentiality clause are clear to those signing them;
- Legislate to improve independent legal advice available to an individual when signing a settlement agreement;
- Produce guidance on drafting requirements for confidentiality clauses; and
- Introduce new enforcement measures for confidentiality clauses that do not comply with legal requirements.
The government proposes to extend the legislation to ensure that individuals receive advice not only on the nature of the confidentially requirement but also on the limitations of confidentiality clauses. This will ensure that legal professionals must provide clarity on the details in a settlement agreement in order for it to be valid, so that individuals are not left with unsatisfactory agreements.
The Solicitors Regulation Authority (SRA) has also committed to updating its guidance on the use of confidentiality clauses. Such guidance will help inform the independent advice from a relevant independent adviser, received by individuals, before they enter into a confidentiality agreement.
Respondents to the consultation were split over whether a specific form of words should be used when drafting a confidentiality clause. WESC suggested that the Government legislate on drafting requirements so that they are clear and specific about what information cannot be shared and with whom, contain agreements about acceptable forms of wording that the signatory can use (e.g. in job interviews or in response to queries by family and friends) and contain clear, plain English explanations of the effect of clauses and their limits (e.g. in relation to whistleblowing).
The government has now committed to take action to ensure that the limits of a confidentiality clause are clearly explained in a settlement agreement or written statement of particulars, in particular, ensuring that provisions in the legislation require that wording is clear and specific. The government also intends to work with relevant stakeholders including the SRA, the Equality and Human Rights Commission and ACAS to produce suitable guidance for solicitors and legal professionals responsible for drafting settlement agreements.
The Government will legislate to introduce new enforcement measures for confidentiality clauses that do not comply with legal requirements. Any confidentiality clause in a written statement that does not meet the new drafting requirements will permit the individual in certain circumstances to be eligible for additional compensation, when brought before an employment tribunal.
Comment and next steps
On 12 March 2018 the SRA issued a "Warning Notice" warning solicitors on the use of confidentiality clauses in settlement agreements as a means of preventing the reporting of sexual harassment allegations (or, indeed, other forms of unlawful conduct). Failure to comply with the Warning Notice by solicitors is treated as a breach of the SRA Principles and could result in disciplinary action. The Warning Notice provides that such clauses are used improperly where they are used as a means of preventing, or seeking to impede or deter, a person from:
- Reporting misconduct, or a serious breach of regulatory requirements, to the SRA or any other regulator.
- Making a whistleblowing disclosure
- Reporting an offence to the police.
- Co-operating with a criminal investigation or prosecution.
In January 2019, the Law Society supplemented this with a practice note governing good practice in the use of confidentiality clauses in settlement agreements.
Confidentiality clauses in settlement agreements should already comply with the good practice outlined in the Law Society practice note. Once the government's new legislative commitments are taken forward, the proposed changes will necessitate some relatively minor changes to the drafting of employment contracts and settlement agreements. Employers should monitor this development and be prepared to review and adjust any template documents at the relevant time to ensure that these changes are reflected.