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Education briefing - Government clarifies how it will restrict the use of non-disclosure clauses in the workplace

  • United Kingdom
  • Education - Briefings

23-07-2019

The use of non-disclosure or confidentiality clauses in employment contracts has been under scrutiny by the Government for many months, with pressure for legal intervention mounting. Last weekend the Government published its Response to the consultation exercise that ran earlier this year on measures to prevent the misuse of confidentiality clauses in situations of workplace harassment or discrimination.

Background

Whilst the Government has consistently asserted that confidentiality clauses can serve a useful and legitimate purpose in the employment context, it has also been unable to ignore a number of high profile cases where employers have used them to prevent victims of workplace harassment or discrimination from speaking out. Last year, in response to various recommendations of the Women and Equalities Select Committee, the Government agreed that confidentiality clauses required better regulation and that it would conduct a consultation over future proposals.

Between 4 March 2019 and 29 April 2019, picking up many of the Women and Equalities Select Committee recommendations, the Government consulted upon various proposals aimed at clarifying the law - for example, ensuring that confidentiality clauses cannot operate to prevent disclosures to the police (amongst other bodies); that the nature and effect of such provisions is sufficiently clear to the individuals who sign them (with a requirement for independent advice in the context of settlement agreements) and the necessary enforcement measures. See our earlier briefing of 7 March 2019 for more information on the consultation exercise.

This weekend has seen the publication of the outcome of that process and the steps the Government will now take. Read the Consultation Response here.

In summary the Government says it will take the following measures:

• legislate to ensure that a confidentiality clause cannot prevent an individual disclosing to the police, regulated health and care professionals or legal professionals

• legislate so that the limitations of a confidentiality clause are clear to those signing them

• produce guidance on drafting requirements for confidentiality clauses

• legislate to improve the independent legal advice available to an individual when signing a settlement agreement

• introduce new enforcement measures for confidentiality clauses that do not comply with legal requirements

We explore these in more detail below.

Legislation on disclosure

In the consultation exercise, the Government proposed to legislate to provide that no provision in an employment contract or a settlement agreement could prevent someone making any kind of disclosure to the police. As well as asking for comments on this proposal, it also asked whether all disclosures to any other specific people or organisations should be excluded - though the Government said it was wary of making this list too broad.

82% of those who responded to the consultation agreed that disclosures to the police should be excluded from confidentiality clauses. In relation to the question as to whether disclosures to other people or organisations should be excluded, the most common recommendation was for disclosures to medical professionals – followed by regulatory bodies, legal advisers and trade unions.

In the Response, the Government has decided that it will legislate to ensure that no provision in an employment contract or settlement agreement can prevent someone from making any kind of disclosure to the police, regulated health and care or legal professionals.

Whilst some of the respondents to the consultation exercise called for a wide range of medical professionals to be covered (included all therapists and counsellors), the Government considers it important to ensure that the professional to whom a disclosure is made is bound by professional confidentiality, which is why the legislation will be limited to regulated health and care and legal professionals.

Ensuring the limitations of a confidentiality clause are clear to those signing them

83% of respondents to the consultation thought that confidentiality clauses should clearly highlight what disclosures are not prohibited.

It the Response, the Government has stated that:

• for confidentiality clauses which form part of a settlement agreement, it will legislate to require confidentiality clauses to clearly set out their limitations

• for confidentiality clauses at the beginning of an employment relationship, it will legislate to require the limitations of the confidentiality clause to be included as part of a written statement of particulars

These new legal provisions will be particularly significant in ensuring that individuals understand the implications of confidentiality clauses before signing a settlement agreement and that they receive explanation of such clauses at the beginning of employment as part of a written statement of particulars.

New guidance on drafting requirements for confidentiality clauses

One of the more controversial areas has been the extent to which the Government should set out a specific form of acceptable wording for confidentiality clauses. The Women and Equalities Select Committee recommended that the Government should set standard, approved wording for such clauses. The Government, however, said it was concerned that requiring a single form of words could become quickly out of date as other protections develop over time and commented that it was highly unusual for legislation to require specific wording to be included.

In the consultation exercise, the Government asked if it should set out a specific form of wording. Interestingly, 44% of respondents thought that it should, with 43% saying it shouldn’t (13% expressed no view). Perhaps not surprisingly, legal respondents, employers and interest groups did not generally support the idea, whereas trade unions and individuals were more in favour.

The Government has dealt with this by saying that it intends to work with relevant stakeholders, including the Solicitors Regulation Authority, the Equality and Human Rights Commission and the Advisory, Conciliation and Arbitration Service to produce suitable guidance for solicitors and legal professionals responsible for drafting settlement agreements.

Improving independent legal advice for individuals signing a settlement agreement

Section 203(3) of the Employment Rights Act 1996 requires that a worker has received advice from an independent adviser (such as a lawyer or a trade union official) as to the terms and effect of the settlement agreement. The Government pointed out in the consultation document that, while this advice should ideally cover the nature of any confidentiality requirements, it might not always cover the extent to which a worker is still able to discuss their experience with anyone. It therefore proposed to extend the current legal requirements to specify that, for a settlement agreement to be valid, the independent advice a worker receives must cover the nature and limitations of any confidentiality clause in the settlement agreement, and the disclosures that a worker is still able to make.

80% of the respondents to the consultation agreed that independent legal advice should be specifically required to cover any confidentiality provisions and the Government says that it has heard of cases where individuals were not provided with adequate legal advice, were unclear of their rights to disclose and unsure of the limitations of the confidentiality clauses in their settlement agreements.

Consequently, the Government has announced that it will extend the legislation to ensure that individuals receive advice “not only on the nature of the confidentially requirement but also on the limitations of confidentiality clauses” and that this change will ensure that legal professionals must provide clarity on the details in a settlement agreement in order for it to be valid, “so that individuals are not left with unsatisfactory agreements”. This requirement will be similarly reflected in updated professional guidance from the Solicitors Regulation Authority.

New enforcement measures

In the consultation, the Government set out its belief that that enforcement measures in respect of confidentiality provisions in employment contracts and those in settlement agreements would need to be different, as they are used in different stages in the employment relationship and may be enforced in different courts.

As far as settlement agreements are concerned, the Government proposed that confidentiality clauses that do not follow new legislative requirements should be made void in their entirety, without voiding the whole settlement agreement. 48% of the respondents agreed with this and 37% disagreed.

In relation to employment contracts, the proposal was that a breach of the requirement to be clear on the limits of any confidentiality clause in the written statement of particulars, could be enforced as any failure to provide a compliant written statement. In other words, when a claimant brings a successful claim for an employment right to a tribunal, and can show that their employer failed to comply with the requirement to provide a compliant written statement, they would be entitled to additional compensation of between two and four weeks’ pay. 46% of the respondents agreed with this and 29% disagreed.

In its Response, the Government has announced that it will legislate to introduce new enforcement measures for confidentiality clauses that do not comply with legal requirements along the lines of these proposals.

When can we expect these changes?

The Government has said it will legislate to implement the commitments in this Response “when Parliamentary time allows”. Despite the significant current challenges upon Parliamentary time and the announcement of a new Prime Minister, there would appear to be strong cross party support for the proposed changes. It is certainly possible that new legislation may be passed by the end of the year. However, if the Government opts to await the outcome of the parallel consultation on sexual harassment in the workplace (which closes on 2 October 2019), to which the provision on confidentiality clauses is inextricably linked, draft legislation may be delayed until next year. See our earlier briefing of 12 July 2019 for more information on the sexual harassment in the workplace consultation exercise.

Comment

What this Response now makes abundantly clear is that it is no longer a case of “if” the Government will legislate to curb inappropriate use of confidentiality clauses but “when”. A new Prime Minister could propose an alternative course but this seems unlikely. Even prior to these Government interventions coming into effect, therefore, we would recommend that institutions should review their practices and procedures (if they have not already done so) and ensure that their use of confidentiality clauses is considered on a case by case basis, is not automatic and is explained fully.

Institutions should also bear in mind that the steps the Government has committed to in this consultation do not sit in isolation. These reforms are part of a wider response to sexual harassment in the workplace, including the consultation referred to above closing on 2 October 2019 and a Code of Practice being expected later this year. Institutions can therefore expect to adapt to a series of legislative and other influences upon their behaviour, practices and procedures in the coming months, focusing upon steps to tackle inappropriate workplace culture.

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