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Non-Disclosure Agreements: New Guidance and Legislation

The rules governing the use of Non-Disclosure Agreements (NDAs) and confidentiality clauses will become more restrictive, explains Lodders’ Employment Law specialist and solicitor advocate, Jennifer Linford.

Kelly Tolhurst, business minister for the Department for Business, Energy and Industrial Strategy is quoted as saying:

 “We will not tolerate the use of NDAs to silence and intimidate victims from speaking out”

Current Practice

Many employers use NDAs for legitimate reasons.

NDAs allow employers to have “off the record” and “candid” discussions with employees, usually about the termination of their employment (when prefaced with the correct wording), the reasons behind it, and the options going forward. This is a valuable tool for employers, enabling them to speak freely in the hope that a sensible discussion and amicable agreement can be reached. And, not forgetting to mention, the significant amount of time and resources the use of an NDA (and the prequel discussions) is likely to save.

NDAs codify the agreement reached with an employee (who must, in accordance with S111A of the Employment Rights Act 1996, obtain legal advice) and provides the employer with a degree of certainty that litigation will not be commenced by the (often disgruntled) employee. NDAs also ensure (in respect of some matters) that the circumstances leading up to the presentation of the NDA and the terms of the NDA will remain confidential.

However, following the #MeToo movement, it became alarmingly apparent that some organisations were using NDAs as a means to buy the silence of victims of workplace sexual harassment, racism, or immoral/unethical conduct (unwanted conduct). It is, in my opinion, easily arguable that the use of NDAs to conceal instances of unwanted conduct is an extension of that very harassment. Using NDAs in an attempt to exert control and power over a departing employee who has experienced unwanted conduct is, again in my opinion, of itself a form of harassment. It is, therefore, perhaps of no surprise that the Government has decided to legislate in an attempt to limit the inappropriate use of NDAs, and to ensure those who sign it are aware of their rights.

Proposed Changes

The Government has confirmed that it intends to legislate to ensure that:

  • Confidentiality clauses cannot prevent the individual from disclosing unwanted conduct (including sexual harassment or racism) to the police or regulated health care and legal professionals;
  • The legal advice provided to individuals when signing an NDA is improved;
  • The limitations of a confidentiality clause are clear and the individual is aware of the limitations; and
  • New enforcements methods are introduced to deal with confidentiality clauses which are not legally compliant.

Further information or advice

The appropriate and correct use of a well-drafted NDA remains a valuable (and viable) option for employers and employees.

Advice from an experienced  employment  lawyer will help to ensure that:

  • Enforceable contractual agreements are reached;
  • Relationships are terminated on agreed and recorded terms;
  • Litigation risks are appropriately managed;
  • Businesses can continue to make commercial and sensible decisions;
  • Individuals are still adequately compensated without the need to involve the courts.

The Law Society has produced a leaflet to help workers understand their rights, in the event that they are asked to sign a NDA. The Law Society hopes to ‘educate’ the public and equip them with knowledge and awareness so that they can make informed decisions. A copy of this leaflet can be downloaded here.

There is a lot to take into consideration when it comes to signing a NDA, and it is advisable to seek legal advice to assist in the process. Lodders’ Employment Law team has extensive experience advising on such matters and is able to provide the support and advice needed to make decisions relating to NDAs.

Should you have any questions, or require any assistance, please do not hesitate to contact either Nick Rowe on 01242 229096, or via email, or Jennifer Linford on 01242 229093, or via email.

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Find out more

For more information, please contact either Nick Rowe on 01242 229096, or via email, or Jennifer Linford on 01242 229093, or via email.