Report out on the use of Non-Disclosure Agreements in discrimination cases

There has been some controversy recently about the use of Non-Disclosure Agreements in cases where an employee has raised a complaint of discrimination.

So, what is a Non-Disclosure Agreement and how do they work? Essentially, they are a “gagging clause” (often contained within another agreement or contract), which seeks to prevent the employee talking about certain issues.

Let’s use an example. An employee makes a complaint that their boss has sexually harassed them at work. The employer decides to offer the employee a payment to leave and asks them to sign a Settlement Agreement. Under the terms of the Settlement Agreement, the employee will have to give up their rights to bring a claim and agree to keep what has happened confidential.

On the face of it, it may look a reasonable outcome. The employee has been compensated for what has happened and they have taken legal advice on the agreement (for a Settlement Agreement to be binding the employee must have had independent legal advice).

However, the Women & Equalities Committee of the House of Commons has produced its report on the use of Non-Disclosure Agreements in discrimination cases. In the report they have considered the concerns that have been raised about such agreements.

In short, they concluded that because it is difficult for an employee to pursue a case in an Employment Tribunal and there is a big imbalance of power between the employer and employee, employees can feel they have little choice but to reach a settlement that prohibits them speaking out.

The report contains many recommendations; here are some of them:

• Use plain English – there should be standard, plain English confidentiality clauses where these are used in Settlement Agreements.
• Increase damages for injury to feelings – they felt this type of compensation should be massively increased in discrimination cases.
• Increase the time limit for bringing a discrimination claim – increase the current time limit to bring a claim of three months from the act of discrimination to six months.
• Employers pay the costs of advice – require employers to pay the legal costs of employees seeking legal advice, and of negotiating the terms in a proposed Settlement Agreement, regardless of whether the agreement is eventually signed. This is a change from the current situation. Whilst it is customary for employers to contribute towards the employee’s legal fees in Settlement Agreement situations, the employer is not legally obliged to do so. Furthermore, it is only a contribution and it is not uncommon for the employee to still incur legal costs above that contribution. It is almost always the case as well that the employee only gets the legal costs contribution if they sign the agreement. So, this would be quite a change.
• Strengthen obligations on employers – require employers to meet their responsibilities to protect those they employ from discrimination and harassment.

So, what can we take from this? At this stage these are only recommendations. However, this is a very prominent issue, so it is likely that some of these recommendations will be implemented by the Government.

There is no doubt that many of the recommendations in the report are sensible. However, if they were implemented, it would raise some practical issues. The main one is many employers simply will not settle unless they can ensure confidentiality. They might prefer to roll the dice and contest the allegations in an Employment Tribunal. This may mean that we see more claims going through the Tribunal’s system, and we know how stretched resources already are, although the new intake of Employment Judges should help alleviate this.

There is an interesting comment from James Laddie QC, who comments on Twitter about the report. Here is what he said:

“I believe the committee understates the value of NDAs. In most (not all) cases, they are essential to parties avoiding an expensive and traumatic hearing that neither side wants. It’s true that NDAs harm the public interest in as much as they make it much more difficult for allegations of discrimination & harassment to come to light. But the public interest in enabling litigants to settle their disputes is at least as important.”

As with everything it is a balance. We will report to you again on this subject when there are further developments in this area.

If you have any questions on this article, or any other area of Employment Law or HR, please contact Rob Tice on 01332 866610 or email at rob.tice@precepthr.com.