Ministers are to bring forward a consultation on the use of non-disclosure agreements (‘NDAs’) in employment matters following another high-profile figure facing accusations of using the agreements to pay off former employees following accusations of sexual harassment and racial abuse.

Theresa May has confirmed that the Government will bring forward its consultation “to seek to improve the regulation around non-disclosure agreements and make it absolutely explicit to employees when a non-disclosure agreement does not apply and when it cannot be enforced”.

What are NDAs?

Often referred to as “gagging clauses”, an NDA is a legal contract used to prevent people from discussing confidential information and to help keep trade secrets private. It is clear, however, from recent news headlines that they have been used to keep allegations of wrongdoing out of the press.

What can NDAs do?

It is important that employers are aware of the limits of what NDAs can achieve by way of confidentiality. For example, NDAs cannot be used to try and gag employees from making protected disclosures to relevant regulatory bodies or to the police if a crime has been committed.

NDAs have a legitimate place when used correctly; companies will often need to ensure that confidential information such as sensitive financial data is kept under wraps and away from competitors’ view. Similarly, there is a place for such agreements when looking to protect trade secrets.

NDAs can also legitimately enable employers to avoid the expense of having to defend false allegations through the public arena of courts and tribunals.

The Law Society has recently published guidance on NDAs confirming that if an employee is not represented, then the solicitors acting for the organisation offering the NDA will be responsible for ensuring that no abuse of position or unfair advantage is taken.

The Law Society has also encouraged creating good workplace culture as a foundation for preventing unwanted behaviour. The best way to avoid an intimidating culture from developing is to put in place appropriate policies so everyone is clear as to what is acceptable, what to do if they are concerned about unacceptable behaviour, and to ensure reporting systems are trusted. Good organisations encourage early internal reporting and have in place a reporting policy that clearly states:

  • reporting is welcomed;
  • how the organisation will investigate reports; and
  • those making reports will suffer no detriment.

As the debate over the correct use of NDAs continues, it is clear that government guidance will be welcomed by both employers and employees.

For further information or guidance on non-disclosure agreements, please contact a member of our Employment Team who will be happy to assist.