Settlement Agreements and Non Disclosure Agreements

Insights - 08/03/2019

With International Women’s Day, we thought it timely to touch upon the ongoing issue of non-disclosure agreements (NDA’s) otherwise called confidentiality clauses that usually form part of Settlement Agreements.

It is common in Settlement Agreements for there to be a clause that relates to the employee keeping the terms and circumstances surrounding the parties entering into a Settlement Agreement confidential in return for financial payment.

Following the #metoo movement and the press outrage that surrounded the Court of Appeal finding in favour of Philip Green with respect to an NDA which prevented the publication of allegations relating to his conduct, there has been much discussion about the use of NDA’s generally, particularly with respect to Settlement Agreements.

Clearly it would not be appropriate for an NDA to shield perpetrators of abuse, harassment and/or discrimination, from investigations into their actions.  However, it is also true that the vast majority of Settlement Agreements are not entered into for the sole purpose of silencing victims of abuse, harassment or discrimination. The primary purpose of the vast majority of Settlement Agreements is to record a compromise reached to avoid litigation.

The Government acknowledges that confidentiality clauses have a right and proper place in the employment context:

“They can be used primarily in two ways: as part of employment contracts, to protect trade secrets for example, and as part of settlement agreements, for example to allow both sides of an employment dispute to move on with a clean break. There are also existing legal limitations on confidentiality”.

However, the Government accepts the evidence of the Women and Equalities Select Committee that further regulation is called for to prevent the abuse and misuse of NDAs.

On 4 March, the Government launched a consultation on proposed measures to better regulate NDAs in situations of workplace harassment or discrimination. The consultation closes on 29 April 2019.

The consultation touches on a number of areas. With respect to Settlement Agreements, the government is considering whether to introduce a requirement for the employee to have received advice on the meaning of the confidentiality clause in particular, including a clear statement about its limits and what the employee is free to disclose. This would be in addition to the existing statutory requirement that the employee receives legal advice. The Government proposes that falling foul of such a requirements would render the clause void.

If the proposals become law it may be necessary to amend employment particulars, review, and possible amend contracts of employment, (as well as Settlement Agreements) in order that they comply with the new rules. The Government will want to strike a balance so that employers do not become reluctant to use settlement agreements at all.

This consultation has potentially far reaching consequences and we will keep you updated in respect of developments. Please feel free to contact us if you need advice on your Settlement Agreement.

You can contact your usual adviser or call 01737 854500 and ask for a member of the Employment Team. We have offices in Redhill, Wimbledon, Woking, Camberley, Teddington and Oxted.

Disclaimer:

Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.