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Calls for Action on Non-Disclosure Agreements

on Friday, 14 June 2019.

The Women and Equalities Committee has published a report identifying a number of concerns regarding non-disclosure provisions in settlement agreements to resolve employment disputes or terminate employment.

It has also made recommendations for the protection of workers who have been subjected to discrimination or harassment at work.

Issues

One of the issues highlighted by the Committee, appointed by the House of Commons to examine the government's performance on equalities issues, is the imbalance of power between employers and employees. Employees who are victims of discrimination and harassment feel pressured to sign non-disclosure agreements (NDAs) to avoid detrimental treatment, for example to ensure that they get a reference from their employer in order to move forward with their careers.

Another issue is disincentives for employees to seek redress from the employment tribunal, which put further pressure on employees to sign NDAs to ensure that they receive some compensation. In the Committee's view, these disincentives include short time limits for claims, lack of access to affordable legal advice, the system being too onerous for litigants in person with complex claims, and low compensation awards. The Committee also noted that the online publication of tribunal judgments means victims run a risk of being blacklisted by future employers, this being a particular issue for ethnic minorities with more distinctive names, while anonymity is possible but difficult to obtain.

The report notes certain excessively strict clauses which appear in NDAs. These may prevent parties from seeking professional advice and support, prevent whistleblowing or prevent parties from assisting with police and court proceedings. The report suggests that while some clauses are unenforceable and others may be seen as perverting the course of justice, parties are reluctant to challenge them for fear of reprisal.

The Committee also pointed to a lack of regulation and sanctions for employers who fail to take action to protect employees from discrimination and harassment, using NDAs to suppress allegations rather than investigating and dealing with them.

Recommendations

Recommendations proposed by the Committee include:

  • an awareness-raising programme for employers on how to handle grievances
  • requiring employers to investigate all discrimination and harassment claims even if a settlement is reached
  • requiring employers to provide minimum basic references for employees
  • extending the three-month time limit for certain discrimination claims
  • an equalities review of the employment tribunal system
  • a review of practical support available to litigants in person and of access to legal aid
  • improved remedies for successful discrimination and harassment claims, including punitive damages
  • legislating to ensure NDAs cannot be misused to prevent victims seeking support or discussing potential claims with other alleged victims
  • making it a professional disciplinary offence for lawyers to propose clauses which are unenforceable or which prevent protected disclosures (whistleblowing)
  • requiring employers to contribute to the costs of employees taking legal advice on settlement agreements, including on content, effect and enforceability of specific clauses

Best Practice

It remains to be seen which, if any, of these recommendations will be implemented by the government. However, there is increasing scrutiny over the use of NDAs in the workplace and we will keep you updated with developments in this area. Employers should ensure employees are aware of procedures for raising grievances or concerns around discrimination and harassment in the workplace, along with signposting to relevant guidance and support. It is also best practice to investigate any allegations of discrimination or harassment, even where ultimately they result in settlement, to ensure that issues do not recur and perpetrators are sanctioned for their behaviour.


For more information, please contact Michael Halsey in our Employment Law team, on 020 7665 0842, or complete the form below.

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