Could settlement agreement confidentiality clauses be banned?
The latest target of the #MeToo movement could be settlement agreement confidentiality. It is currently being reported that the Government is to examine use of NDAs in employment disputes. An NDA is a ‘Non Disclosure Agreement’, a legally-enforceable promise by an employee not to reveal, eg that they have suffered from discrimination or other breaches of employment rights. These are a key feature of settlement agreements.
This news comes on the back of a report published recently by the House of Commons’ Women and Equalities Committee. The key finding from the report is under the heading “A chilling effect? The silencing of victims”:
We are concerned that NDAs are being widely used to silence victims of sexual harassment in the workplace and to prevent cases being brought into the public eye for fear of bad publicity. However, the confidential nature of these agreements makes it difficult to estimate out how many there are out there and to gauge how ethically they are being used. The main risks from unethical use of NDAs in silencing victims [are] that individuals
- will not report serious wrongdoing to the police;
- will feel compelled not to assist with relevant law enforcement investigations or prosecutions; and
- will feel unable to speak openly and in the public interest about serious wrongdoing
thus inhibiting public awareness and debate.
- A new duty on employers to prevent harassment, supported by a code of practice.
- Regulatory intervention backed by fines.
- Making it easier to bring a tribunal claim. It proposes extending the time limit for bringing a claim and greater compensation for discrimination.
- Making it a crime to misuse confidentiality clauses in settlement agreements and letting employees who have signed them report wrongdoing to bodies such as the Equality and Human Rights Commission.
- Collecting data on the extent of sexual harassment in the workplace.
It is estimated that 40% of women half that number of men have experienced unwanted sexual conduct at work. Only 40% of employers mention at induction the behaviour expectation and how to report breaches.
Whilst the committee considered that settlement agreement confidentiality clauses are a widespread problem that is not being taken seriously. Our experience is that employers are not proactive in preventing it but that they don’t in fact condone sexual misconduct when they come across it.
it is interesting that MPs are mooting extending the three-month time limit for bringing claims for sexual harassment. We find that this limit is short but that it rarely causes problems for employees, who very rarely leave it too long to do something about it.
We don’t anticipate that settlement agreements will be affected as the report proposes. While in theory it is possible to have a law that allows parties to settle claims and potential claims whilst allowing them to talk about the circumstances that led to the disagreement, it is hard to imagine that industry would allow this change without making a big fuss. We believe that paying ‘hush money’ to claimants is something that is too ingrained in the system.