Have you updated your settlement agreements following new guidance on NDAs? Five key action points for employers tackling the #MeToo movement

Written on 4 Feb 2019

Whilst attention may be focused onto the next round of gender pay reporting, due on 4 April 2019, the need for businesses to tackle wider diversity and harassment issues continues to gain momentum. One key item on the business agenda should be mitigating the risk of #MeToo on the workplace. Extensive media coverage over the past year has exposed endemic harassment and the breadth of the movement has clearly demonstrated the significant reputational consequences arising from unacceptable behaviours in the workplace and that this is an issue all sectors need to be alive to. 2019 is set to see ever increasing parliamentary and regulatory scrutiny, as well as greater employee expectations with respect to the stance that businesses take on this topic. It is more important than ever that employers now ensure that they take proactive steps to mitigate these risks.

Check your non-disclosure agreements (NDAs) following new guidance

Whilst the risk of Employment Tribunal claims arising from unacceptable workplace behaviours is not new, increasing scrutiny of other ‘legal’ arrangements which may tend to mask such behaviours is something which employers must now actively deal with. Following media attention on the use of non-disclosure provisions in settlement arrangements being used to silence victims of sexual harassment, not only have such provisions been the subject of parliamentary focus, but regulators are increasingly addressing this issue. Whilst none have yet suggested NDAs should be banned from employer and employee arrangements (indeed, it is recognised that they are essential in protecting confidential information and, where a dispute has arisen, providing some form of closure), they are setting out the boundaries of how far such provisions should go.

Most recently, the Law Society has issued guidance on using NDAs in settlement arrangements, which follows a warning issued by the Solicitors Regulation Authority last year. Employers, as well as factoring in the requirements from any regulator in their own sector, should be aware that the Law Society guidance potentially impacts on them where they are receiving legal advice on settlement terms (including from their own in-house counsel).

Key points from the Law Society guidance for employers to take on board are as follows:

  • The extent of the NDA: Exceptions should be made to an NDA to ensure that it does not prevent an individual from making certain disclosures. Common examples are set out in the guidance and include:
    • making a protected disclosure for statutory whistleblowing purposes;
    • reporting misconduct or a serious breach of regulatory requirements to an appropriate regulator;
    • reporting an offence to the police or other law enforcement agency and/or cooperating with a criminal investigation or prosecution;
    • making a disclosure when required by law or regulatory obligation or when representing themselves at any investigation or proceedings brought by a regulator or professional body, in relation to the matters arising from their employment.
  • A limit on any restrictions: Where any exceptions are subject to some form of restriction, any limits imposed must be very carefully considered. For example, a common exception to an NDA is permitting an individual to make a disclosure to a spouse, civil partner or close family but subject to the limitation that those individuals agree to keep that matter confidential.
  • Easily understood by all parties: An NDA must be drafted in clear simple English and it is good practice to give anyone signing an NDA clause time to consider the implications of the proposed agreement, including giving them sufficient time and opportunity to obtain independent legal advice.

Achieving a balance in your settlement terms

Employers and their legal advisers will need to ensure that they carefully balance the wish to draw a line under an acrimonious and/or sensitive dispute, against the need to do so in a way that does not cross the line from a regulatory and legal perspective. The Law Society guidance requiring ‘plain English’ may be particularly useful here in ensuring that all parties know where they stand and understand the consequences. However, whilst employers clearly need to be careful to bear the requirements in mind, this does not mean that NDAs cannot be used at all as a practical and long-standing way of settling workplace disputes for both employers and employees. We now await the government consultation to see how it proposes to tackle any statutory regulation around the use of such provisions.

Five action points to tackle #MeToo

So what should employers be doing now?

1. Review your NDA/confidentiality provisions: Review your settlement agreement and any COT3 wording (a COT3 may be used when settling a dispute via ACAS) to ensure any NDA or other confidentiality terms reflect the SRA warning and Law Society guidance and are drafted in a way which can be easily understood. If you are in a regulated sector, check the requirements of your regulator.

2. Review other provisions which may act as an NDA: Review other provisions in your agreement, such as repayment or indemnity clauses which potentially act as an NDA. Care must be taken to check that other settlement terms do not form an indirect barrier to reports or disclosures which would otherwise be notifiable to, for example, the police or a regulator being made.

3. Ensure line managers and HR are aware of the issues: Ensure your HR and line managers involved in any settlement negotiations are aware of the limitations on NDAs and where there is an in-house legal function, obtain sign off.

4. Address risks of potential claims and behaviour occurring: Employers will be vicariously liable for acts of their employees carried out in the course of employment, unless they can demonstrate that reasonable steps were taken to prevent such conduct occurring. To assist with this defence and to minimise the risks highlighted by the #MeToo movement, employers should take a proactive stance by reviewing and implementing effective policies, conducting workplace training, supporting staff and ensuring such issues are not condoned or perpetrated, and fostering a culture where there is no tolerance for sexual harassment.

5. Watch out for further developments: The government indicated at the end of last year, in response to the Women and Equalities Committee report on sexual harassment in the workplace, that it would be issue a new statutory Code of Practice on Sexual Harassment and is consulting on a number of proposals including the better regulation of NDAs.