Under an employee non disclosure agreement, both parties are bound by confidentiality provisions, such as preventing the employee from disclosing certain specified information relating to the conduct of the employer or the termination of the employment contract.
Non disclosure agreements (NDAs) and confidentiality provisions in the employment context have generated plenty of publicity over the past few years. Much of this publicity has been negative, for example, the exposure by the #metoo campaign of the use of NDAs to cover up sexual harassment in certain workplaces and as a result, the government has announced that it will be making changes to the law surrounding the use of NDAs and their content.
In this article, we look at the current position relating to NDAs, how this might change and the steps employers should consider taking as a result.
What are NDAs in an employment context?
The vast majority of NDAs and related provisions are genuine attempts to protect a business and/or to allow all parties to move on from a distressing situation and avoid litigation, but their use in an employment situation has been tainted by recent adverse publicity as a result of some employers, unfortunately, using non disclosure agreements to mask inappropriate behaviour in the workplace, such as sexual harassment. As a result, and in light of government proposals to amend the law and guidance on the topic, employers need to consider their use of these non disclosure agreements and provisions and their wording.
When can NDAs be used with employees?
In employment, NDAs are generally found in:
- The employment contract between the employer and employee; and
- The settlement agreement between the employer and employee.
Often, non-disclosure clauses or confidentiality provisions are included in the employment contract between the employer and employee in order to protect technical information, trade and business secrets, client details and any other confidential information which an employee may discover during their employment. This can obviously be an extremely important element of the employment contract for an employer and employees will generally recognise the need for such provisions.
NDAs also form a crucial part of settlement agreements, in which employees agree to refrain from publicising their grievance or claim against an employer in return for a payment, thereby avoiding what could be costly, time-consuming and stressful litigation for both parties. The terms of the NDA commonly provide that the payment must be returned in the event of a breach of the NDA by the employee.
The non disclosure provisions usually relate to the terms of the settlement and the details of any relevant grievance. As a result, employers are able to minimise the risk of bad publicity and manage their reputation, while employees are often happy to walk away from the situation without having to resort to employment claims or litigation. Employees may also be keen to ensure confidentiality of the matter and it is common for mutual confidentiality provisions to be included.
Despite the mutual benefit to employers and employees that NDAs may bring, particularly in a dispute or employment claim scenario, it is in this area that many of the problems and negative media attention surrounding NDAs have arisen.
What is the current position with the use of NDAs?
As the law currently stands, there are certain situations in which an NDA will not apply, regardless of its wording (lawful disclosures). Employees are able to make a disclosure, notwithstanding the existence of a non disclosure agreement, where it is a protected disclosure in relation to the legislation concerning whistleblowing. Further, a disclosure required by law, such as the provision of evidence in court, will not be caught by the terms of an NDA. Public policy may also permit a disclosure, provided that it is genuinely in the public interest to be aware of the information.
As a result, the terms of an NDA or non-disclosure provisions are more likely to be upheld if there is express wording that the employee may make a disclosure:
- If they are required to do so by law;
- If they are required to do so by a regulatory body;
- To the police or healthcare professionals;
- To their legal adviser;
- If the information is already publicised; or
- Pursuant to the Public Interest Disclosures Act 1998.
Although NDAs are an acceptable means of protecting confidential and proprietary information in an employment context, following a number of high-profile cases in the media which have highlighted the inappropriate and illegal use of confidentiality clauses in settlement agreements, there has been significant controversy over misuse of NDAs to intimidate and silence victims of unlawful and criminal conduct in the workplace.
In particular, the international #MeToo campaign, encouraging women to speak up about sexual harassment in the workplace, uncovered evidence that serial perpetrators of sexual harassment had gone on to harass and assault more women because their previous victims had been silenced and paid off.
Following media attention and a consultation exercise, guidance on the use of NDAs and similar provisions, for solicitors and other legal practitioners has been issued by the Solicitors Regulation Authority and the Law Society and the government has also announced that new legislation will be put in place to govern the use and misuse of NDAs in an employment context. Although not yet in force, employers should ensure that they are aware of the changes being made and review their current NDAs and/or non-disclosure wording sooner rather than later. It has not yet been made clear whether such legislation will apply retrospectively to NDAs already in place.
In turn, together with other campaigns and media coverage, this raised political and regulatory concerns in the UK over the misuse of NDAs. As such, on 4th March 2019, the UK government launched a consultation with proposals to tackle the misuse of confidentiality clauses in cases of sexual harassment and discrimination, with a view to providing a greater understanding over rights and legal responsibilities, and providing further protections for the most vulnerable.
As set out above, the law currently provides that confidentiality clauses, or NDAs, cannot prevent an individual from making a protected disclosure, otherwise known as whistleblowing. However, the government has consulted on a number of proposals to bring in additional legislative measures to put an end to the unethical use of NDAs and encourage good practice from employers at all times.
The proposed measures include the following:
Legal limitations of NDAs
The introduction of new legislative measures to ensure that no provision in an employment contract or settlement agreement can prevent someone from making any kind of disclosure to the police in order to report a suspected crime.
Equally, it is proposed that nothing should prevent an individual from having a legitimate discussion in relation to allegations of harassment or unlawful discrimination with regulated health and care professionals or legal professionals bound by confidentiality duties.
Clarifying the limits of NDAs
The introduction of new legislative measures to ensure that employers make clear the limitations of a confidentiality clause or non disclosure agreement to those signing them, in particular, that these limitations are clearly set out in either a settlement agreement and/or as part of a written statement of employment particulars.
This includes proposals to ensure that the wording here is clear and specific about what information cannot be shared and with whom, and contain plain English explanations of the effect of clauses and their limits, for example, in relation to whistleblowing.
The government, together with organisations such as ACAS, also intends to produce new guidance for solicitors and legal professionals on drafting requirements for NDAs, to be aligned with any legislative changes, to provide employers, employees and their representatives with greater clarity on their use.
Accessing legal advice for NDAs
The introduction of new legislative measures to ensure that the independent legal advice a worker is required to receive prior to signing a settlement agreement covers both the nature and limitations of any confidentiality clause.
Enforcement measures for NDAs
Finally, the introduction of new enforcement measures for NDAs that do not comply with legal requirements in settlement agreements or written statements of employment particulars, whereby any non disclosure agreement that does not meet the new drafting requirements may result in an additional award of compensation when brought before an employment tribunal.
Common pitfalls of employee non disclosure agreements
Non disclosure agreements should only be used to protect information which genuinely requires protection. They are not a way to disguise or conceal improper workplace behaviour, which should be dealt with promptly, appropriately and consistently.
Similarly, NDAs should not be used to deter or threaten employees from making lawful disclosures. It is important that this be borne in mind in respect of the entire NDA and not just the specific non-disclosure wording. For example, a clause dealing with the repayment of any amounts paid to the employee in the event of a breach of the NDA may indirectly be perceived as such a deterrent or threat.
Some NDAs are drafted extremely widely, using legalese rather than plain English. Permitted disclosures, such as those mentioned above, may not be clearly set out. Employees may not fully understand what they are signing and may be confused as to whether the NDA is enforceable or not against specific disclosures. This could result in the NDA being void.
Employers should also be mindful of the actual need for an NDA. Often, employees are asked to sign an NDA as a matter of course, with little consideration as to whether such a document or provision is really needed in the situation. There will be little or no benefit to an employer requesting that an employee who has no dealings with detailed technical information or client details sign an NDA.
In terms of the actual usefulness of an NDA, employers should be aware that simply the existence of an NDA may have potential reputational repercussions. When entered into for valid reasons, an NDA will hopefully discourage employees from publicising the information that the provisions are designed to protect but if an employee does breach the non-disclosure terms, employers should think carefully about whether bringing a claim for such a breach may have an adverse effect on their reputation.
What can employers do to ensure NDAs remain enforceable?
- Employers should seriously consider each situation on an individual basis to decide whether an NDA is actually required.
- Keep abreast of the new legislation surrounding NDAs, its terms and whether it will apply to NDAs already in place.
- NDAs should be written clearly and relate to the risk that they are aiming to ameliorate, rather than try to cover all possible options.
- Obtain a full legal review of the non disclosure agreement or non-disclosure provisions to ensure that they do not, directly or indirectly, deter or threaten the employee with adverse consequences in the event of a lawful disclosure or breach.
- Include a statement of the situations in which the NDA will not apply, for example, in respect of whistleblowing claims and where information is required to be given to a healthcare professional, regulatory authorities, the police and so on. Ensure that the NDA is clear as to who the employee can make disclosure to, including close family.
- Ensure that employees asked to sign an NDA or settlement agreement including non-disclosure provisions are fully aware of, and understand, the situations in which the non disclosure agreement will not be enforceable.
- Consider offering to pay for the relevant employee’s independent legal advice or at least contributing to the cost.
Ensure that the relevant employee is given sufficient time to be able to fully consider the terms of the NDA; do not rush them into signing anything.
- Once the NDA has been entered into, provide a copy of the signed document to the relevant employee in a timely manner.
- Provide training and support to HR staff, managers and other members of the organisation who are likely to have to deal with settlement agreements and/or NDAs. Ensure that such staff members understand when NDAs are required and in what situations disclosure may be made.
- Put in place a ‘zero tolerance’ policy towards harassment and other improper behaviour in the workplace and ensure that all staff members are fully aware of the policy and relevant processes. Doing so should eradicate, or at least minimise, such behaviour and as a consequence, will reduce the need for settlement agreements and NDAs. If any allegations of improper workplace behaviour are made, they should always be properly and fully investigated.
While non disclosure agreements within the workplace remain subject to wider public interest and scrutiny, employers should proceed with caution now more than ever when considering using an NDA.
DavidsonMorris are experienced employment law specialists, with expertise in employment contract terms, including non disclosure agreements. We can advise on initial drafting of the contract terms or on a specific matter and interpretation of existing employment contract terms. If you have a question or need advice on any aspect of a non disclosure agreement, contact us.
Employee non disclosure agreement FAQs
Are employee confidentiality agreements enforceable?
Employee non disclosure agreements are legally binding on both parties, provided they have not been invalidated and are not being used to stop whistleblowing, reporting a crime or other specific circumstance such as discrimination, harassment or sexual harassment.
What is an employee confidentiality agreement?
An employee confidentiality agreement is a contract between an employer and an employee that specifies certain confidentiality provisions, such as preventing the employee from disclosing certain specified information relating to the conduct of the employer or the termination of the employment contract.
What happens if you break an NDA?
The terms of the agreement will state the consequences and legal remedies available to the other party in the event of breaching the contract provisions.
Last updated: 12 April 2023