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Terminating Employment and the future use of Non-Disclosure Agreements

05 July 2019

Steven King

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The UK Government’s Women and Equalities Select Committee has conducted an inquiry into the use of non-disclosure agreements (NDAs). The committee made recommendations for limiting an employer’s ability to use NDAs when settling workplace disputes involving allegations of unlawful discrimination and harassment in the workplace.

 

Settlement agreements are a common tool used to settle employment disputes. They allow the parties to resolve the dispute with the employee agreeing not to pursue further action against the company, usually in exchange for compensation. Used appropriately, they can benefit both parties. Moreover, they serve a public interest as they help to settle disputes without the need for a tribunal hearing, freeing up public services. An NDA restricts what an employee can say, or who they can tell, about the termination of their employment, including any harassment or discrimination that they may have been subjected to. These restrictions can be in the form of confidentiality clauses or non-derogatory/disparagement clauses which are common to settlement agreements.

 

The report has made a number of recommendations, including a potential extension of the time limit for bringing claims of sexual harassment or pregnancy/ maternity discrimination and a legal requirement for employers to provide employees with a basic reference confirming dates of employment. In addition to these seemingly moderate suggestions they are also proposing more sweeping reform, including:

  • a one-sided costs-shifting system in sexual harassment cases, whereby an employer losing the case would have to pay a claimant’s costs but the claimant would have no equivalent obligation if the employer successfully defends the claim;

  • An employer should pay for an employee’s legal advice in relation to negotiating certain clauses in a settlement agreement, even if they do not ultimately enter into an agreement; and

  • a significant increase in the bands of awards for injury to feelings.

 

These are substantive changes that, if enacted, could bring about a significant change to the fundamental bargaining positions of the parties.  

 

One thing to note is that the Women and Equalities Select Committee is only responsible for making recommendations, not making the law. It is the responsibility of the government to decide whether or not to accept and implement these recommendations. However, with the hostile public response to wrongdoing following the Harvey Weinstein fallout and the advent of the #MeToo era, even the most obstinate of governments would find it difficult to completely oppose reform. Therefore companies should be prepared that the use of NDAs, whether restricted to cases of harassment and discrimination or applied more broadly, is likely to be changed going forward.

 

With this in mind, employers should take this as an opportunity to conduct a pre-emptive audit of their working culture and practices. Specifically focusing on how to approach settling workplace disputes and the use, or potential misuse, of NDAs in discrimination and harassment cases.  Creating a culture in which bad behaviour is not be tolerated should be a priority set by senior individuals and carried out by managers throughout the company. Eliminating all bad behaviour should be the goal despite it being an impossible task, especially in larger organisations. If an employee alleges that another employee has subjected them to bad behaviour, then the company should investigate the incident properly and consider whether disciplinary action is necessary. In most situations, taking certain action can be crucial in preventing a complaint from morphing into an employment claim against the company.  

 

If you would like advice on dealing with workplace disputes, please contact our employment team.

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Solicitor

Steven King

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