In this note, we look at the recent guidance issued by ACAS on the use of settlement agreements or "non-disclosure agreements", otherwise known in the media as gagging clauses. We look at whether such guidance is sufficient to tackle the potential misuse of NDAs. 


What does the guidance say?

Under the new guidance, employers cannot use NDAs to stop someone from: 

  • reporting discrimination or sexual harassment at work or to the police 
  • blowing the whistle 
  • disclosing a future act of discrimination or harassment 

The broad theme of the guidance is that NDAs should not be used to cover up a particular issue or problem, employers should think twice before using NDAs or consider alternatives to them, and if it must use it then explain to the employee concerned why it's being used. 

This all sounds sensible but how will it prevent the misuse of NDAs? 

NDAs have become something of a staple in an employment relationship. Oftentimes they are used not to cover up allegations of sexual abuse or discrimination but primarily: 

  • To effect a clean break of the relationship between employee and employer 
  • To allow an employee to walk away in return for the reassurance that the employer will not be exposed to future risk of legal claims 
  • Keep matters confidential and prevent one party from defaming the other 

The final element is subject to two important safeguards: i) you cannot prevent the employee from making protected disclosures i.e. whistleblowing; and ii) you cannot prevent the employee from disclosing matters to a relevant regulator. These safeguards had been in place before the #metoo era. 

In short, in majority of cases NDAs are not used to "cover up" allegations of sexual abuse or any other discriminatory actions but as a way of amicably terminating an employment relationship. Rogue employers hell bent on hushing up sexual abuse allegations may continue to use NDAs, and if they do, at least at the moment, there is no immediate legal recourse for the employee concerned to stop this. 

Legislate and give courts enforcement powers 

For any measure designed to prevent the misuse of NDAs to have bite in sexual abuse cases, it needs to be legislated and be enforceable by a competent court of law, perhaps an employment tribunal. 

Such procedure may look something like this: employers must, by law, have a policy in place that lays out the steps that must be taken when an alleged sexual abuse is reported in the workplace (including an independent investigation), and must follow those steps to their conclusion. Such policy would stipulate that NDAs cannot be used unless and until an employment tribunal has reviewed the matter and adjudicated on it. If an employer does not wish to take it to the tribunal, then it must conclude the process without using an NDA. If an employer has used an NDA in breach of this procedure or placed undue pressure on the employee to sign it, the employee concerned can challenge the validity of such an agreement to an employment tribunal. The costs of such measures must be borne by the employer if the employee succeeds in their challenge. 

None of this is to interfere with the current legal recourse an employee has such as taking legal action against their employer for sexual harassment or any other causes of action under the Equality Act 2010.

Admirable and sensible though it is, the new guidance by ACAS is just that, a guidance. We need strong legally enforceable measures to tackle the misuse of NDAs. 

ACAS Guidance on NDAs

Key contact

Sungjin Park

Sungjin Park

Knowledge Lawyer, Employment
London

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